Offshoring fears unfounded

Jul 09 2007 by Nic Paton Print This Article

The notion that emerging economies such as India are plundering thousands of high-quality jobs through offshoring is completely unfounded, a British think-tank has claimed.

An analysis by The Work Foundation has concluded that fears that large numbers of high-quality Western jobs are being lost to rapidly developing offshoring sites are being overstated.

In fact just 5.5 per cent of jobs lost across Europe in the first quarter of this year were due to offshoring, it calculated, a relatively small increase on the comparable figure of 3.4 per cent in 2005.

What's more, the number of jobs in sectors popularly believed to be vulnerable to outsourcing, such as call centres, has actually gone up rather than down in the UK.

Travel (at £626 million) and transportation (£289 million) are the largest services imported from India, while computer and information services (£122 million) are only the third largest import category, it said.

And the UK imported almost four times more computer and information services and over sixteen times more business services from Germany than from India, with India only ranking fifteenth on the list of countries from which the UK imports services.

Katerina Rüdiger, author of the paper, said: "If you go to an Indian business district you could be forgiven for thinking the whole world is chucking work and jobs at India because of its magical high-skill, low-wage mix.

"India's high tech sector is indeed booming, but is not 'coming for our lunch' as some of the more apocalyptic commentators have suggested," she added.

Yet deep fears still persist. U.S economic guru Professor Alan Blinder has predicted that 30 million to 40 million US jobs could go offshore within the next generation, with formerly "safe" roles such as accountants, lawyers, derivatives traders, teachers and lecturers all potentially up for grabs.

Similarly in May research by Forrester Research calculated that a total of 830,000 U.S. jobs had been shipped overseas by the end of 2005, nearly a quarter of a million more than it had predicted two years ago.

And by 2015, it forecast 3.4 million jobs would have moved offshore.

Another consulting firm, A.T. Kearney, has calculated that by 2008 financial services companies will have planned to offshore 500,000 information technology job, or some 8 per cent of all banking, brokerage and insurance positions.

And a poll by consultancy Hewitt Associates found nearly half of companies questions now had some operations overseas, with seven out of 10 of those that had yet to offshore planning to do so in the future.

The Work Foundation study does concede that trade in services between the UK and India is rising, but it is not happening nearly as fast as is sometimes imagined, with an increase from 0.4 per cent to 1.2 per cent between 1995 and 2004 less of an explosion more of a slow evolution, it stated.

While some people have been displaced it is not as simple as a straightforward jobs migration from north to south or west to east, Rüdiger said.

Rather what was being seen increasingly was companies mixing business models, therefore combining near-shoring, off-shoring and retaining operations close to home.

In the other direction, successful Indian companies were also now beginning to set up offices and target affluent western consumers.

Countries that outsourced most also tended to be the recipients of most outsourcing. The top recipients of outsourcing were rich, industrialised countries rather than poor, developing ones, The Work Foundation argued.