Saturday, August 26, 2006

The outsourcing time-bomb keeps ticking

http://business.timesonline.co.uk/article/0,,8210-2329369,00.html


BRENDAN BARBER, the General Secretary of the TUC, seems to have ridden to the rescue of the fund manager. The trade unionist has taken a stand for the “victims” of globalisation, calling on British companies that move jobs abroad to take out insurance that pays 70 per cent of their redundant workers’ fall in earnings. “The Government,” he says, “must provide support to older and unskilled individuals to help them adapt to the opening up of world markets.”


Unfortunately, his assessment grossly underestimates the scale and shape of future outsourcing. Globalisation threatens many more people than manufacturing workers, the unskilled and the elderly. In an article in Foreign Affairs earlier this year, Alan Blinder, the economist who worked for the Clinton Administration, forecast that about two to three times the number of US manufacturing jobs — 14 million — would in the future be susceptible to offshoring. His argument is that the definition of “tradeable” goods and services and “non-tradeable” goods and services is fundamentally changed by the information age. It is no longer the case that things you can put in a box (manufactured goods) are tradeable and things that you cannot (services) are non-tradeable. Blinder makes the convincing case that what really matters in the era of the internet is whether services are personal, i.e. face to face, or impersonal, i.e. deliverable down a cable. Taxi drivers and nurses need to be where they work; securities analysts, radiologists, IT technicians and translators do not need to be. Not only will globalisation have a profound impact on white-collar workers, it will have an uneven impact. Barristers may be safe, because they need to operate in the courts in Britain; solicitors look much more vulnerable, as much of their work can be done in an office anywhere.



Taking Blinder’s calculations — and they are educated guestimates — and applying them to the UK is a thought-provoking exercise. The US and the UK economies are structurally not so different: 14.3 million US jobs are in manufacturing — or about 10.7 per cent — the same proportion as in Britain (3.3 million). If the Electronic Age means that impersonal service- sector jobs are bound to leave the country, then seven to ten million people are vulnerable.

The numbers, though, are not a curse, but a spur. Insurance schemes to compensate the “victims” do not address the fundamental challenges of globalisation. Nor do simple calls for more education. The UK needs to think more deeply about the nature of its schooling, nurturing inventiveness, creativity and, happily, personal skills to equip the next generation to do business in Britain.

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