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Outsourcing slowing US job creation
April 10, 2004 14:47 IST
Workforce reductions in the US technology sector, which fell to a three-year low in the first quarter, could be partly attributed to oustourcing, which is slowing new job creation, according to a new survey.
First-quarter job cuts in the high-tech sector -- which includes telecommunications, electronics, computer and e-commerce -- were 64 per cent lower than the 82,328 cuts announced in the previous quarter and 52 per cent lower than the first quarter of 2003 (61,032), according to the survey by Chicago-based Challenger, Gray and Christmas Inc.
"This may not mean that telecom is the weakest of the technology industries, but it is clearly the most volatile. While some areas in this industry are consolidating, others are expanding," John Challenger, chief executive officer of the company said in a statement.
"Overall, technology job cuts appear to be waning, a trend which may temper some of the increasingly heated debate over the controversial practice of offshore outsourcing.
"However, while the latest survey data show that offshore outsourcing is not leading to a surge in job-cut announcements, one can still argue that it is slowing job creation in technology," he said.
According to the survey of Silicon Valley venture capital firms on employment trends, technology startups face difficulty getting off the ground if they don't outsource some company functions.
One company calculated the monthly cost of keeping one tech employee in Silicon Valley at $15,000; a worker with the same skills, responsibilities and job package would cost $2,500 a month in New Delhi.That represents a savings of $12,500 every month or $150,000 per year. By sending 10 jobs to India, a startup can eliminate $1.5 million from its payroll, it noted.