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Electron pushers face offshoring
May 16, 2007
Is offshoring a boon or a bane? The Washington Post this month has presented commentary on both sides of this issue.
Here is Princeton economics professor Alan S. Blinder in a May 6 column: “I'm a free trader down to my toes…Yet lately, I'm being treated as a heretic by many of my fellow economists. Why? Because I have stuck my neck out and predicted that the offshoring of service jobs from rich countries such…to poor countries…may pose major problems for tens of millions of American workers over the coming decades.” That’s because, he continues, “a growing list of services can be zapped across international borders electronically.”
That’s a point I’ve been making for over three years (and I’m not alone), but it’s nice to see a self-acknowledged free-trader get on board.
Blinder predicts a huge problem: “In some recent research, I estimated that 30 million to 40 million US jobs are potentially offshorable. These include scientists, mathematicians, and editors [yikes!] on the high end and telephone operators, clerks and typists on the low end.” (See my earlier post, “Outsource proofing.”)
What can be done? Not much, he suggests, saying, “You can't block electrons from crossing national borders.” So why even bring up the subject? “If we economists stubbornly insist on chanting ‘Free trade is good for you’ to people who know that it is not, we will quickly become irrelevant to the public debate.”
But writing in the Post today, columnist Robert J. Samuelson has a completely different take: “Remember the great "offshoring" debate? It was all the rage a few years ago. Modern communications allowed white-collar work to be zapped around the world. We faced a terrifying future of hordes of well-educated and poorly paid Indians and Chinese stealing the jobs of middle-class engineers, accountants, and software programmers in the United States and other wealthy nations.”
So what happened, he asks? “Well, not much.” One study, he said, showed that only 4% of mass layoffs in the US and 5% in Europe were due to offshoring.
Why these low numbers? Samuelson writes, “One reason for modest offshoring is that it's not so easy to do. It involves more than just changing phone numbers and switching computer hookups. A survey by the consulting firm A.T. Kearney found the following problems: cross-border differences of culture and language (80%); lack of skills offshore (49%); customer complaints (49 %).”
Samuelson acknowledges that “As communications technology improves—and companies gain experience—offshoring may increase.” And he cites Blinder’s earlier column. Nevertheless, he continues, “The reality is that, though globalization is increasingly important, it's still a weakling compared with the domestic economy. The antidote to job loss is job creation, and that depends decisively on national economic policies and conditions.”
He is a little sketchy on how that might be accomplished. I think globalization is inevitable and ultimately beneficial to everyone, but it could be accompanied by a wrenching transition.
Posted by on May 16, 2007 | Comments (7)
