The aging American population, among other factors, makes the case for outsourcing IT and other jobs to locations like India and the Philippines, according to a report from an Indian IT industry association.

The report from Nasscom (National Association of Software and Services Companies), said that global sourcing will provide U.S. companies with cost-savings and increased flexibility that will keep them competitive in the global arena.

The 80-page report, titled "The Impact of Global Sourcing on the U.S. Economy, 2003-2010", predicts that the U.S. will experience an annual GDP growth of 3.20 percent, which will lead to an increased demand for labor.

But the country will see a domestic labor shortage of 5.6 million by 2010, because of an aging population and slow population growth. This could cost the country's economy up to US$2 trillion if it is not addressed in time, according to the report.

The report was written by research firm Evalueserve Inc, which interviewed economists and outsourcing experts worldwide, and looked at statistics and forecasts from the U.S. Congressional Budget Office (CBO) and the U.S. Bureau of Labor Statistics.

Evalueserve CEO Marc Vollenweider was quoted in the Nasscom press statement as saying that the results were "compelling".

According to the report, the United States can fend off the crisis by global sourcing in the form of immigration, temporary workers and outsourcing.

"The study clearly shows the necessity of offshore activity to support the growth of the U.S. economy. The report also found that outsourcing keeps U.S. businesses competitive, creates new markets for U.S. goods and services, and fills the shortfall in services labor that the US is expected to face in the next seven years," said the Nasscom statement.

The outsourcing of IT services, the report argues, has allowed U.S. workers to tackle specialized and creative work, while more run-of-the-mill tasks have been pushed abroad. The proportion of specialists in the U.S. IT workforce, it notes, increased from 38 percent in 1983 to 74 percent last year.

The report admits that there will be a short-term impact on the U.S. employment market as 1.3 million jobs move offshore in the next seven years. About 1 million workers in the country will be affected, but 70 percent of these will be only temporarily out of work, says the report.

As more than 8 million jobs are reallocated every quarter in the U.S. economy, the reallocation process should not be a strain. The remaining 300,000 workers will require retraining, suggested the report.

Amid growing worker resentment towards outsourcing in the United States, last month saw street protests in California, with demonstrators decrying the loss of U.S. jobs as more firms relocate software and other IT work to lower-cost countries like India.

Forrester Research estimated that the number of U.S. computer jobs moving overseas will grow from about 27,000 in 2000 to more than 472,000 by 2015.