Forecasts Differ On The Scope Of U.S. Offshoring

By Staff Report

Mar. 29, 2006

A pair of recent reports offer conflicting views of offshoring’s scale–and different lessons for how employers should plan their global workforces.

In the March/April edition of Foreign Affairs magazine, Princeton University economist Alan Blinder argues that service-sector jobs representing nearly a third of the U.S. labor market could be susceptible to offshoring in the future, with computer programming among the threatened occupations. A new study by the Association for Computing Machinery, meanwhile, suggests that the upper limit to offshoring is well below half that level over the next 15 years, and that there will be plenty of work for information technology professionals in the United States.

“Current data and economic theory suggest that despite offshoring, career opportunities in IT will remain strong in the countries where they have been strong in the past even as they grow in the countries that are targets of offshoring,” the professional group says.

Citing government data, the association says there were more than 3 million jobs in 11 IT occupations in May 2004, a figure that surpasses the number during the dot-com boom in 2000 and is up 3.8 percent from May 2003.

The association’s study, “Globalization and Offshoring of Software,” points toward a future in which companies will employ many skilled service-sector workers in the United States. Blinder, on the other hand, says organizations will be sending abroad much of their services work that isn’t “personal.”

“Constant improvements in technology and global communications virtually guarantee that the future will bring much more offshoring of ‘impersonal services’—that is, services that can be delivered electronically over long distances with little or no degradation in quality,” he writes.

In his article “Offshoring: The Next Industrial Revolution?” Blinder says jobs prone to offshoring do not fall into the traditional categories of high-skill versus low-skill. While taxi drivers and airline pilots both are buffered from overseas competition, typists and accountants are vulnerable, he argues.

Offshoring, which refers to sending work from higher-wage countries to lower-wage nations, has emerged as a major corporate strategy and hot-button political issue in recent years. Among the duties that have been sent overseas are transcription services, payroll tasks and call center work.

Despite their differences, the two new reports share some common ground. The association agrees with Blinder that higher-skill work, such as computing research, is being done abroad and that U.S. software professionals face more global competition.

Both reports also call attention to programs to help those who have been hurt by international trade. “The United States may have to repair and thicken the tattered safety net that supports workers who fall off the labor-market trapeze–improving programs ranging from unemployment insurance to job retraining, health insurance, pensions and right down to public assistance,” Blinder writes. “At present, the United States has one of the thinnest social safety nets in the industrialized world, and there seems to be little if any political force seeking to improve it. But this may change if a larger fraction of the population starts falling into the safety net more often.”

Ed Frauenheim

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