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Jury out on the overall impact of offshoring jobs

Offshoring American jobs continues to be a hot topic, particularly here in Mississippi where so many manufacturing jobs have been shipped out of the country. Is it a good thing or a bad thing?

There are ardent arguments going both ways. Some say the increase in service jobs will more than compensate for the loss of manufacturing jobs. But wait — don’t service jobs pay less than manufacturing jobs, so offshoring is still a bad thing even if the total job count remains the same? Maybe so, maybe not. Either way, many service jobs are now being offshored as well as manufacturing jobs. Where is this leading?

The jury is still out on the impact of offshoring to U.S. businesses. However, the fact of offshoring is real and its certain that it will continue. Thus, learning to live with the reality of offshoring is not an option. I read an article recently on the subject that might be enlightening, maybe even comforting.

Dr. Alan Blinder, head of Princeton’s Center for Economic Policy Studies, recently published a fascinating paper dealing with offshoring service sector jobs. It is a scholarly, but highly readable, piece, which I found fascinating and comforting.

Jumping ahead

It’s probably lousy journalism, but I’ll put the conclusions here at the beginning rather than build to a climax at the end. Service jobs will continue to be offshored, but the sky isn’t going to fall and we’re not going to die. Though major restructuring of industrialized society will result, massive unemployment in the rich countries will not.

Dr. Blinder presents the history and economic impacts of the several industrial revolutions experienced over the past few centuries. He speculates that the current trend toward increasingly offshoring service sector jobs is nothing less than another industrial revolution itself. The end result of this industrial shift will be the same as in all prior revolutionary restructurings, namely economic prosperity through higher productivity at lower cost. I won’t attempt to recap the entire paper. However, you can read it for yourself at www.princeton.edu/~ceps/workingpapers/119blinder.pdf/.
The Web address for the center is www.princeton.edu/ceps/. Henceforth, I will use Dr. Blinder’s ideas without specific attribution since this entire column is based on his theory.
What are the implications for Mississippi and what should we be doing to prepare for the future? If Dr. Blinder is correct, and his logic makes sense to me, we may be heading a little in the wrong direction. Not completely the wrong direction, our course just needs a little tweaking.

Considering the future

Many Mississippians, including me, have believed that the future belonged to those who were highly educated in high-skill areas. Everyone else was going to be left behind jobless. Without deducting anything from my view that education is key to success, perhaps everyone won’t be required to be a techno geek to survive.

There are certain characteristics common to service jobs that are susceptible to offshoring. These characteristics have less to do with education and more to do with the necessity for personal, face-to-face contact. If the service can be performed from afar without any loss in quality and effectiveness it will likely be offshored to a cheaper labor market.

Some examples might be helpful. The business of call centers, hotel and airline reservations and interpreting radiology x-rays can be done anywhere in the world without loss of quality or inconvenience. On the other hand, the crime problem in Jackson cannot be offshored to policemen in India. Likewise, taxi drivers, surgeons and waitresses must be up close and personal with their customers so those jobs are not susceptible to offshoring.

Now, assuming the Dr. Blinder’s theories are accurate, what does this mean for the future of America’s workforce? Two conclusions come to mind. First, encourage workers toward jobs that can’t easily be offshored. Some of these jobs are, indeed, high-tech and require years and years of training, but others don’t. Second, Mississippi still desperately needs to increase the general educational level of our workforce. Education is key to flexibility and being flexible will become increasingly important as technological changes occur. Clearly, a college degree is not required for most workers, but the basics of reading, writing and arithmetic are.

The implications for the future are clear. Our education system needs to be changed to better prepare youngsters for jobs that will be available in the future. It will likely take decades for the offshoring of service jobs to come full circle, but today’s youngsters will still be in the workforce at the end of those decades.

Thought for the Moment

Prudence is, indeed, the duty which we owe to ourselves, and if we will be so much our own enemies as to neglect it, we are not to wonder if the world is deficient in discharging their duty to us.

— from the book “Tom Jones” by Henry Fielding

Joe D. Jones, CPA (retired), is publisher of the Mississippi Business Journal. Contact him at cpajones@msbusiness.com.

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