Globalizing IT services, investing in human capital should generate high-skill U.S. jobs

• Author: Christine Ebrahim-zadeh
• Position: IMF External Relations Department
• Pages: 81-86

Page 81

The most important driver of IT price declines is technological change. But in the 1990s, globalized production and international trade also helped lower prices 10-30 percent more than they would oth erwise have been. The lower prices, Mann said, were key to broad-based investment in IT capital throughout the U.S. economy, which was responsible for more than half of the acceleration in labor productivity and added at least $230 billion to GDP over 1995-2002.

The 1990s saw demand for high-skilled IT workers, such as computer software engineers, rise in the United States. Page 85

Without a globalization of IT hardware production, GDP growth in the United States might have been 0.2 percentage point less a year in the second half of the 1990s, she added.

At the same time, globalization did not, on balance, undermine competitiveness as U.S. multinational firms maintained a net positive trade balance in IT hardware exports. By sourcing their components abroad, Mann said, these firms were able to build a competitive foundation for enhanced export competitiveness for IT hardware.

What about IT jobs?

The diffusion of IT investment throughout the U.S. economy is reflected in the fact that two-thirds of U.S. workers who use IT in their occupations- such as programmers, systems engineers, analysts, and database administrators-work in non-IT sectors. But has investment in IT equipment and software translated into job creation? They move in lockstep, said Mann, pointing to the rate of change in the number of jobs and investment in IT software processing equipment, both of which boomed beginning in 1991, peaked in 1997, and declined dramatically in 2001. In 2003, however, growth in IT investment picked up again, and the decline in IT job growth moderated.

Moreover, over the course of the 1990s, the demand for workers with the highest IT skills rose rapidly in conjunction with investment in IT. Mann compared IT employment numbers for 1999 with those for 2002. Over that period, she noted, about 241,000 people in the sector-data entry operators, computer operators, and computer programmers who earned between $23,000 and $64,000 a year-lost their jobs. Over the same period, however, the number of computer software engineers whose annual salary averaged nearly $75,000, grew by more than 115,000. The data do not differentiate, however, between jobs lost...