Back to a favorite topic of mine: offshoring. Why am I so obsessed with this? Two reasons:
- FI Space is about looking at the future context in which ACS must operate, and the outsourcing/offshoring situation may portend a fundamental shift in the global economy and the fortune of nations, including the US. I happen to think it is a pretty strong indicator that long-lasting changes are taking hold.
- On a more personal side, by marriage I have a 15-year old granddaughter and a 12-year old grandson. She aspires to be the reigning high school queen-bee, and he is a Tony Hawk wannabe. I worry about how they’re going to fare when they enter the world of work. I wonder not just about what the situation will be when they enter the workforce after college but about how they’re going to sustain a lifetime of earning when career-spans could be 50 years. Sort of long range fretting.
The most recent entry in the debate over the pros and cons of offshoring is a study entitled, “The New Wave of Outsourcing,” coming out of the Fisher Center for Real Estate and Urban Economics at Berkeley. It’s not just jobs at stake but commercial real estate too, and, I’d guess, personal real estate and everything else when the ripples circle out. The report opened some eyes when they estimated that, out of 128 million US jobs, more than 14 million jobs are “at risk” of outsourcing. They estimate that 11% of jobs have characteristics similar to jobs being outsourced currently.
- No face-to-face customer requirement
- High information content
- Work process is telecommutable and Internet enabled
- High wage differential with similar occupation in destination country
- Low setup barriers
- Low social networking requirement
Specific jobs the report says tend to have these characteristics include:
- Software development
- Internet development
- Telecommunications software
- Data processing
- Accounting, bookkeeping and payroll
- Call centers, answering services and telemarketing
Some free-market true-believers say, tish-tosh, this is all normal economic activity that will free up the US workforce for other jobs. Indeed, one way to look at this is to get rid of the “us” vs. “them” mentality. Instead of “American” jobs and “offshore” jobs, you can say that the world needs many millions of programming, accounting, and back-office business service jobs done. The conditions are right to have them done many places, by people with the right skills at salaries that will tend to converge toward an average—above the current lowest and below the current highest. With respect to a growing list of skills, location doesn’t matter so much and will matter less in the future.
Cost reduction might even occur in health care, not an unwelcome thing. Ever since I read the report that the VA is wiring-up 25,000 vets to see if care costs can be reduced by monitoring their vitals by telecommunications, I’ve wondered: “Hmm. Why couldn’t a lot of medical ‘back-office’ work be done outside the country? Once you’re wired, the record-keeping, monitoring and perhaps case analysis could be done anywhere.” How much face-time do patients get with doctors these days anyway? Even robotic surgery is moving ahead.
So the same cost cutting that is at work in the IT industry might help reduce the seemingly relentless rise in US health care cost. Indeed, at BIOSILICO an Indian venture capitalist reported she is looking for opportunities to do biotech, drug R&D, and clinical trials in India. Might reduce the frequently-cited cost figure of $800 million to get a drug on the market.
And for people who want to have incomes above some global average, the economists’ advice is “go up the value chain.” In other words, if you can do a job that’s more innovative, original and valuable than someone in India, China or Hungary, you don’t have to worry. All I can say is, when there is a three- or four-fold (or more) difference in average salary, that value-added is going to have to be pretty terrific.
I wish I could feel as sanguine about the change process as an economist. I still have some trouble turning loose of my national and community perspective. Are kids, parents, high-school guidance counselors and college curriculum designers preparing to go up the value scale? Some of the unemployed high-tech people in mid-career don’t seem to be finding it easy to add new skills or transfer what they know to another area. The “next big thing” is supposed to be biotech or nanotech. But from what I’ve seen, it’s no easy task to get into that. Silicon chips and gene chips may sound similar, but they’re not.
Still, my own perception is that what we’re seeing is the inevitable working of the global free market. It’s here to stay. As a nation, as communities and as families we’re going to have to think in terns of a new, large game-board. Both global scale and accelerating change are factors that will be a more prominent part of our lives from here on.