Electronic Design

Does Outsourcing Lower U.S. Engineering Salaries?

While the insourcing of foreign workers with H-1B visas takes center stage in the current trade debates, the outsourcing of U.S. engineering work remains an important issue for U.S. engineers. As one engineer put it, "Eliminating engineering H1-B visas will only accelerate outsourcing to India and China."

In fact, it’s hard to find a more polarizing issue with engineers than the dispute over whether outsourcing actually contributes to unemployment, depresses wages, and discourages younger people from joining the profession or whether it provides relief to overworked staffs, speeds time-to-market, helps avoid layoffs, taps necessary expertise, and generally benefits the bottom line.

Adding fuel to the discussion was the recent revelation that the Bush administration buried a government report on outsourcing prior to the 2004 elections for political reasons—and that the report’s analysis was allegedly doctored by Bush political appointees in the Commerce Department. The report concluded that U.S. chipmakers were accelerating the outsourcing of design work to Asia at the expense of skilled engineering jobs at home.

According to the National Academy of Engineering (NAE), as logistical barriers to the performance of engineering work at remote locations continue to erode, the global pool of trained engineers is growing. This means that U.S. engineers are now in global competition with engineers in developing nations whose wages are 40% to 80% lower than theirs.

Nearly as important as job displacement is the possibility that offshoring could create significant downward pressure on engineering salaries, which the NAE says is likely if engineers in the U.S. are unable to produce significantly greater value than their lower-paid counterparts abroad.

According to the NAE, there is ample evidence that offshoring combined with technical changes led to stagnant wages for factory workers during the 1990s, which means there is a distinct possibility that engineers might experience a similar situation in the near future.

This year’s Electronic Design survey shows that 40% of engineers believe that outsourcing will result in lower salaries for new engineering hires. It also indicates that one in four engineers anticipate salary reductions for existing employees as a direct result of outsourcing.

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