Outsourcing IT jobs to India - What economists don't tell you

Pro business organizations have been going on the offensive to demonstrate that oursourcing IT jobs is good for the U.S. economy. The arguments made from organizations such as the conservative Heritage Foundation make the case that the global economy increases efficiency and profits which benefits the economy on a whole. In a report the Heritage Foundation addresses what they call the "10 Myths about Jobs and Outsourcing." Their basic premise is that: 1) not many jobs are lost on the grand scale; 2) Free trade benefits American companies and consumers; 3) The global economy improves efficiency for all involved which benefits everyone.

What all of these arguments gloss over is the effect of the overall job market pay scale. Increasing the competition within the labor market decreases pay scale demand. In other words; even if IT jobs don't go overseas, there is still downward pressure on the pay scale for these jobs. Don't demand a pay raise or you might find you won't soon have a job at all. The threat of job outsourcing is an equal, if not more potent means for depressing the payscale. It's good for business, not so good for labor. It is not by chance that corporate profits have gone up by thousands of percent since the 1980s but real wages (wages adjusted for inflation) have stayed put.

There is still growth in the IT job market and this is what pro business organizations are hanging their hat on. However; it really misses the effect on supply and demand within the labor market and they want to make sure you continue to miss this point.