2003 October 31 Friday
Berkeley Study: 14 Million Jobs At Risk From Foreign Outsourcing

Offshore outsourcing seen as an even bigger threat than previously predicted.

Berkeley, October 29, 2003 – A ferocious new wave of outsourcing of white-collar jobs is sweeping the United States, according to a new study published by University of California, Berkeley, researchers, who say the trend could leave as many as 14 million service jobs in the United States vulnerable.

Study authors Ashok Deo Bardhan and Cynthia Kroll, both researchers at the Fisher Center for Real Estate and Urban Economics housed at UC Berkeley’s Haas School of Business, say that not all of the at-risk jobs are likely to be lost. But, they note, jobs remaining in the United States could be subject to pressures to lower wages, and the jobs that leave may slow the nation’s job growth or generate losses in related activities.

Jobs most vulnerable to the new wave of outsourcing, the researchers say, include medical transcriptions services, stock market research for financial firms, customer service call centers, legal online database research, payroll and other “back office” activities. Altogether, the positions feature vulnerability-producing attributes such as a lack of face-to-face customer service, work processes that enable telecommuting and Internet work, high wage differentials between countries, a high information content, low social networking requirements, and low set-up costs.

Bardhan and Kroll say that the widely quoted Forrester Research (an independent technology research company) report issued in 2002 that 3.3 million jobs would be lost to outsourcing by 2015 already seems conservative. They point to the rate of outsourcing over the past few years to India – 25,000 to 30,000 jobs in June 2003 alone.

Even face-to-face customer service will be affected as companies compare the costs of, say, face-to-face customer contacts versus phone contacts and other electronic ways of interacting with customers.

In the face of all this intensifying competition from abroad the United States should not have an immigration policy to bring in millions of unskilled workers with less than 9th grade educations. We need an immigration policy designed with knowledge worker competition in mind. We could improve our educational system in ways that increase the number of sharp knowledge workers we have as well. See the post Accelerate Education To Increase Tax Revenue, Reduce Costs.

Share |      By Randall Parker at 2003 October 31 03:29 PM  Economics Political

Ray Clutts said at October 31, 2003 8:40 PM:

I've been enjoying your free ice cream (commentary) for quite some time now and thought I'd leave a note to that effect lest you begin to think you're preaching to an empty room.

My partner and I own a company that has been engaged in outsourcing the patient finance functions for various hospitals (see hfri.net). To date we remain an exclusively American operation for our sites and employees.

In my estimate, the imperatives of the market competition being what they are, any company that doesn't outsource will be devoured by the first opponent within their industry that takes the jobs offshore and keeps the addtional profit margins that they realize by reducing personnel expense. I'm left to conclude that the Republican party may well be forced to return to its nativist roots among the Know Nothings and to William McKinley's tariff barriers if any American industries are to survive.

And perhaps it's just a matter of my own technological illiteracy but I don't understand how I might address an email to you. Although, perhaps that's your very point.

M said at November 1, 2003 4:35 AM:

History is happening and we're stuck with leaders who can't get over the '60's.
I predict the Dems will go for tarrifs first,they really don't have much left to run on that might appeal to a broad base,this might revitalize the party in the short term.

Randall Parker said at November 1, 2003 4:30 PM:

Ray, I'm not sure if you left a legal email address. I sent you an email. Not sure if you got it.

Thanks for letting me know that I have real live readers. I get very little feedback.

Invisible Scientist said at November 4, 2003 10:49 PM:

So far, the USA managed to "con" the foreign countries
by paying for the entire cumulative foreign trade deficit
by using paper currency instead of gold. This is why over 45 % of
the treasury bonds are owned by foreigners. But
the total US government debt is close to $7 trillion,
and the money supply M2 is also approximately
the same, meaning that non-US citizens, effectively, own
close to 50 % of the US money supply. This is one reason
the trade imbalance will almost certainly lead to
a lot of social and military tension in the world.

Republican said at August 6, 2005 4:56 PM:

Companies that use domestic labor, exclusively, in the face of competition by those companies that use cheap foreign labor would have to use equally cheap domestic labor to survive. That could be feasible if you were pulling in just anyone to fill the position. However, customer service would be severely compromised, as the cheapest American labor is largely of very low education level. Overseas, they have better-educated workers willing to take the same jobs. That's why so many companies do outsource overseas. They're getting more bang for the buck.

Ayn said at August 6, 2005 10:20 PM:

Re: HFRI mention by another poster

Hey! I couldn't help but note that someone mentioned HFRI here.

That company has a reputation throughout the Chicagoland area of being a healthcare financial company with an absolutely top quality Human Resources department.

Some of the competitors in the area have heard his name mentioned by former employees, so it sounds like you folks have someone there who is just a rising HR star. Hope he's well-paid.;-)


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