New Study Claims Job Losses Due to Offshoring Minimal

New Study Claims Job Losses Due to Offshoring Minimal

Globalization is indeed boosting in the US, which leads to an idea called offshoring / Photo Credit: georgerudy via 123rf

 

By the start of the 21st century, globalization had taken root in US industries, and economists had predicted that offshoring—domestic work done outside the US—would take away white-collar jobs from Americans onshore.

Ron Kincaid was a man who knew what it's like to worry about his job being outsourced.

It looked like a foregone conclusion for Kincaid, having overheard conversations about which foreign contractors would be given which jobs at the company where he worked. He also remembered the meeting where a company executive thought aloud the possibility of the entire department being shipped to India. Kincaid thought about how much notice the company would give him, the size of his severance package, and how to tell his wife that he had been laid off. 

All that is water under the bridge now, and more importantly for Kincaid, he was never taken out of his job. He eventually resigned from the company but has managed to remain gainfully employed in the 15 years since that time. The jobs apocalypse in the US that the economists were drumbeating because of the outsourcing trend simply did not happen. 

While US business ultimately did move millions of jobs to India, the Philippines, and other countries where cost was cheaper, the job losses were compensated by growth in other parts of the US economy. 

 

Blinder’s 2007 Study

Alan S. Blinder, a Princeton economist and former Clinton administration official, published a study in 2007 that claimed that a quarter or more of the jobs in the US were likely to be offshored within the next decade. But US companies would soon realize that labor savings could be diminished by several factors, such as time zone differences, language barriers, legal impediments, and the complexities of coordinating work halfway around the world. They would later decide that it would be better to relocate the jobs to less expensive places in the US than to ship them overseas. 

In his 2007 study, Blinder graded occupations from 1 to 100 based on how easily they could be outsourced abroad. At the bottom of the scale were the bus drivers and electricians, whose jobs obviously can only be done in the US. At the top of the list were computer programmers and telemarketers, jobs which by that time were already being outsourced to other countries. 

 

The reported job losses were compensated by growth in other parts of the US economy / Photo Credit: gstockstudio via 123rf

 

Ozimek’s 2019 Follow-Up Study

Another economist, Adam Ozimek, did a follow-up study to find out if Blinder’s study is still valid a decade later. What Ozimek discovered was that some job categories that Blinder deemed vulnerable, such as data entry workers, had undergone a decline in employment in the US. But other jobs, such as actuaries, continued to grow. 

Of the 26 occupations that Blinder adjudged as “highly offshorable,” only 11 suffered job cuts while the remaining 15 continued to add jobs, based on Ozimek’s data. All in all, only 200,000 jobs have been eliminated over the past decade and not the millions that have been feared by a lot of people. A second job tier, which Blinder deemed “offshorable,” had actually added more than 1.5 million jobs. 

Ozimek’s study found that in the jobs that Blinder categorized as offshorable, a growing number of workers were now working at home. Ozimek believed that more people were working in satellite offices or for third-party contractors rather than at the companies’ main offices or headquarters. Technology, such as cloud computing and teleconferencing, has allowed those jobs to be done remotely but not as remote as Blinder had expected. 

 

Call Center Jobs

Call centers are one such example, with telemarketing jobs plunging sharply in the US since 2007, with most of the work now being done on foreign soil. Despite the decline in telemarketing jobs, the number of customer service representatives has gone on increasing. 

 

 

While there are similarities between the two occupations, the differences in their employment trends could be due to cultural and logistical factors. Telemarketers use a script in selling products while customer service and other call center jobs require a keener understanding of the customer experience. 

Del Thorpe, a senior vice president for Kelly Services, said the US’ call center industry has not yet gone moribund. Thorpe added that a lot of American businesses have opted to relocate jobs in more affordable parts of the country or allow their workers to take calls from home rather than move customer service jobs abroad. 

Kincaid could relate to Thorpe’s remarks. After resigning from the company where he was working, Kincaid was hired by another company to manage a team of programmers working from India. It really was not the best fit for either Kincaid or the Indian programmers, since the time zone differences and distance made collaboration difficult. He eventually told the company that it would be better to have the work done in the US once more. “I can share my screen with them, but I can’t, in real-time, sit with them while they’re making mistakes and show them where they’re making the mistakes,” he said. 

Kincaid is currently working for Nexient, which develops software for other companies. All of its employees are in the US, which Nexient uses as a selling point to its clients. Nexient CEO Mark Orttung said offshoring may be fine for certain types of work, such as short-term projects, but may not be suitable for projects where collaboration is critical and the requirements change over time.

 

Persons Engaged in Production by Industry

The US Bureau of Economic Analysis reported that the number of workers employed in domestic industries rose from 131,414,000 in 2011 to 148,596,000 in 2018. The federal government was the biggest domestic employer in the US, accounting for 20,435,000 employees in 2018 followed by healthcare with 19,088,000, and manufacturing coming in third with 12,649,000 workers.