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U.S. software and technology companies will save $21 billion a year by 2008 through hiring workers in India and other low-cost nations, adding $124 billion to the U.S. economy, an industry-funded study forecast.

The cost savings will cut U.S. inflation, increase productivity, boost wages and create 317,367 new jobs over the next five years, according to a study funded by the Information Technology Association of America, which is based in Arlington, Virginia, and represents 500 companies such as AT&T Corp., Amazon.com Inc. and International Business Machines Corp.

"There is one time-honored agreement in economics: free trade produces gains for all parties," Lawrence Klein, a 1980 Nobel Prize winner and one of the authors of the study, said at a press conference. "That is still the case. The American way has always been to move to activities that are higher value-added."

The study is part of an effort by U.S. companies try to head off calls in Washington for limits on layoffs and on government contracting with overseas employees, along with other measures they label "isolationist."

U.S. unions and Democratic lawmakers are pushing for measures that they argue will save jobs. Payrolls have shrunk by 2.2 million workers since President George W. Bush took office in January 2001. Senator John Kerry, of Massachusetts, the Democratic challenger, last week offered a tax plan that he said would end the tax breaks he said companies get for moving employment overseas.

The Bush administration has said that the hiring of overseas workers is good for the U.S. economy, the world's largest with gross domestic product of $11 trillion in 2003.

"It's one aspect of trade, and there can't be any doubt about the fact that trade makes America strong," U.S. Treasury Secretary John Snow said in an interview with the Cincinnati Enquirer yesterday, according to a transcript.

"If we can keep the American economy strong and growing and expanding, we'll create lots of jobs," he said. "We always have."

U.S. companies say they agree, and are trying to fight criticism by presenting data that show how hiring low-cost workers in India or other nations can benefit the entire U.S. economy. This study finds that spending on overseas outsourcing for computer services and software already stands at $10 billion a year, and will more than triple to $31 billion by 2008.

Hiring workers overseas enables U.S.-based multinationals to cut costs, operate around the clock and tailor products to local needs, the study said.

As more Indian and Chinese workers are hired and earn higher salaries, that will increase the demand for U.S. goods and lead to more U.S. jobs and higher wages, according to Nariman Behravesh, chief economist for Global Insight, the economic forecasting firm based in Lexington, Massachusetts. Unrelated areas such as construction, teaching and health care will all add employees over the next five years because of the economic gains from outsourcing, the study predicted.

Still, the group of technology companies said that 372,000 jobs in software and services -- 10 percent of the total number of information technology jobs -- were lost since 2000.

"There's no question that there's real dislocations for some workers," Behravesh said at the press conference. And for information technology workers "we do expect there will be and has been some wage compression."

There are already signs that students are preparing for a U.S. labor market that has less demand for technology workers, and that those workers won't be earning as much.

The number of new undergraduate computer science majors dropped 23 percent last year, after remaining constant for the previous three years, according to the Computing Research Association, a Washington-based group representing more than 200 North American academic departments of computer science, computer engineering, and related fields.

"Fifteen to 20 years down the road what you'll see is the loss of jobs," said Josh Bivens, an economist at the Economic Policy Institute in Washington, which focuses on labor, trade and education policies. "It's not a major force now, but I don't think it's irrational to worry about it."

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