Read Full Report
Date: July 28, 2008
Contacts: Maureen O'Leary, NAS, 202-334-2138
Randy Atkins, NAE, 202-334-1508
e-mail <news@nas.edu>
FOR IMMEDIATE RELEASE
Offshoring Is Transforming U.S. Engineering,
Although Data Are Lacking to Assess Net, Long-Term Impacts
WASHINGTON -- Offshoring of engineering activities has increased significantly in recent years across a range of industries, and will continue to expand in scale and sophistication, according to a new workshop summary from the National Academy of Engineering. Offshoring, the transfer of work from the United States to entities abroad, is benefiting many U.S.-based companies and contributing to the creation and retention of U.S. engineering jobs in several industries. However, the impact of offshoring on careers across the U.S. engineering work force is uneven, requiring further study and attention to those negatively affected, the report says.
"Offshoring is an inevitable aspect of globalization," said William Spencer, chairman emeritus of SEMATECH and chair of the committee that wrote the report. "Companies will perform engineering work wherever it best advances their business objectives. Skilled talent will be secured and utilized on a global basis, just as capital and raw materials are. In order to sustain a strong U.S. engineering enterprise, government, universities, professional societies, and individual engineers will need to adapt to this changing situation."
Responding to technology and market shifts, a number of U.S.-based companies have sited engineering activities in India, China, and elsewhere to establish and retain global leadership in industries such as semiconductors and personal computer manufacturing. In the process, some U.S. engineers have lost their jobs or experienced slower salary growth. These negative impacts appear to have been relatively modest so far, as the overall business cycle and technological changes have a larger impact on the short-term fortunes of the engineering work force than offshoring does. Also, some foreign-based companies are "onshoring" by increasing their engineering operations in the United States.
However, the long-term implications for U.S. engineering are less clear. The committee found that significant gaps in the data on trade in services and employment make it difficult to assess the net effects of offshoring on the U.S. engineering work force. This is due in part to the problem of tracking offshoring within companies, as well as the fact that many companies are reluctant to release information about their offshoring practices.
These gaps in data extend to the education and careers of engineers. Current trends show a decrease in the proportion of undergraduate students seeking engineering degrees relative to other fields; however, the extent to which offshoring contributes to this long-term decline in popularity is unclear.
The report was written by a diverse committee of engineering experts, academics, and economists to improve our understanding of the motivation for offshoring and consider the implications for the future of U.S. engineering practice, labor markets, education, and research. The centerpiece of the project was a public workshop featuring the discussion of commissioned papers on the offshoring of engineering in six industry sectors -- software development, semiconductors, personal computer manufacturing, automobiles, construction engineering and services, and pharmaceuticals.
Offshoring has been enabled by the growing availability of skilled engineering talent in locations that have lower labor costs, by advances in communications technology, and by innovations in business practices. The commissioned papers show that the extent to which U.S.-based companies are offshoring engineering work, and their motivations for doing so, vary across the industries studied. Offshoring has become an expected part of the business model for many information technology -related companies. While the initial decision to send IT-related engineering work abroad is often motivated by cost considerations, there is evidence that offshored work is becoming more sophisticated over time. Automakers are organizing their global engineering activities in order to make product development more efficient and to enhance their competitiveness in the most rapidly growing global markets. Offshoring is not just a U.S. phenomenon -- Taiwanese companies are now offshoring engineering in the personal computer manufacturing industry to mainland China. Pharmaceutical companies based in Europe are moving research and development activities to the United States.
As the globalization of engineering work continues, an increasing number of U.S. engineers will be vulnerable to the negative impacts of offshoring and other labor market shifts. There was considerable discussion at the workshop about how educational institutions, government, and professional societies might develop new approaches to education and career development to help engineers keep their skills up to date. Other options such as expanding eligibility for Trade Adjustment Assistance to service sector workers and providing wage insurance were also explored.
The workshop discussion and report also identified several issues that require further monitoring and study, such as whether U.S. immigration policies provide artificial incentives for offshoring, and the possible national security risks from offshoring in industries such as software engineering, semiconductors, and construction engineering.
The workshop and summary were sponsored by the National Academy of Engineering, the National Science Foundation, and the United Engineering Foundation. The National Academy of Sciences, National Academy of Engineering, Institute of Medicine, and National Research Council make up the National Academies. They are private, nonprofit institutions that provide science, technology, and health policy advice under a congressional charter. A committee roster follows.
Copies of The Offshoring of Engineering, Facts, Unknowns, and Potential Impacts are available from the National Academies Press; tel. 202-334-3313 or 1-800-624-6242 or on the Internet at http://www.nap.edu. Reporters may obtain a copy from the Office of News and Public Information (contacts listed above).
# # #
[ This news release and report are available at http://national-academies.org ]
NATIONAL ACADEMY OF ENGINEERING
Committee on the Offshoring of Engineering: Facts, Myths, Unknowns, and Implications
William J. Spencer * (chair)
Chairman Emeritus
SEMATECH
Austin, Texas
Linda M. Abriola *
Dean of Engineering
Tufts University
Medford, Mass.
Peter R. Bridenbaugh (ret.)*
Executive Vice President,
Automotive
ALCOA Inc.
Boca Raton, Fla.
Stephen W. Drew *
Drew Solutions LLC
Summit, N.J.
Samuel C. Florman *
Chairman
Kreisler Borg Florman General
Construction Co.
Scarsdale, N.Y.
Susan L. Graham *
Pehong Chen Distinguished Professor
Computer Science Division-EECS
University of California-Berkeley
Lori G. Kletzer
Professor of Economics and Department Chair
University of California-
Santa Cruz
Anne L. Stevens *
Chairman, President, and CEO
Carpenter Technology Corp.
Reading, Pa.
George J. Tamaro *
Consultant
Mueser Rutledge Consulting Engineers
New York
Marie C. Thursby
Hal and John Smith Chair
in Entrepreneurship
DuPree College of Management
Georgia Institute of Technology
Atlanta
STAFF
Thomas Arrison
Study Director and Senior Program Officer
Policy and Global Affairs Division
The National Academies
Penelope Gibbs
Senior Program Associate
Program Office
National Academy of Engineering
Proctor Reid
Director
Program Office
National Academy of Engineering
|