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Offshoring of U.S. Jobs Didn’t Happen As Expected

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Is offshoring of U.S. jobs alive and well?  Between 1990 and 2011 the U.S. manufacturing sector lost one out of every three jobs, or a reduction from 16 million workers in 1993 to just over 10 million in 2011.  In a 2007 paper Princeton Professor Alan Blinder said somewhere between 22% and 39% of all U.S. jobs would leave the country in a decade or two to “mostly poorer” nations.  Professor Blinder went so far as to rank jobs on an “offshorability index” to show the ones most likely to leave the U.S.

Offshoring of U.S. Jobs

The mass offshoring of U.S. Jobs didn’t happen.  Why?  Here are a few reasons why the offshoring of U.S. jobs went to lower cost of living areas or  to remote work instead of to India.

Coastal Labor Costs

Blinders said, “Where in retrospect I missed the boat is in thinking that gigantic gap in labor costs between here and India would push it to India rather than to South Dakota.”  The companies that started the offshoring of U.S. jobs trend were largely based in Manhattan or the West Coast, very high cost of living areas.  While no American location can compete directly with India on labor costs, “Hey, there are a lot of other places in the U.S.,” that come closer said Susan Lund of McKinsey Global Institute.

Cultural Understanding

Call centers are a good example of this.  While telemarketing jobs in the U.S. have declined sharply since 2007 as that work was sent overseas, the demand for customer service and tech support workers in the U.S. has remained healthy.  Those types of positions require a more nuanced understanding of the customer and their issues.

Mathematicians, statisticians and mathematical science occupations are listed high on Blinder’s offshorability index, but, as recruiters in this space, we have seen offshoring come full circle.  While these positions are number driven, the interpretation of the results goes beyond recognizing standard deviation from the norm.  Our clients tried putting these quant roles outside the U.S. and just found the understanding of the U.S. marketplace to be more important than originally thought.

Time Differences

Another issue of the offshoring of U.S. jobs  was the inconvenience to U.S. based employees of having to rely on workers who were only available in the middle of the night. U.S. based employees were working their regular work-day then having to make time to interface with their support group or co-workers in foreign time zones.  Making them unhappy in their job was not a good way to retain hard-to-find data scientists. Companies decided they were better off moving jobs to less expensive parts of the U.S. rather than out of the country.

Technology

The rise of cloud computing and improvement in videoconferencing enables jobs to be done remotely, just not necessarily as remotely as India or China. Rapid improvements in artificial intelligence, robotics and other technology endanger some jobs but create new opportunities requiring different skills. If the U.S. worker doesn’t adapt their skill set, U.S. companies will probably be forced to utilize offshoring to make up the shortfall.

Unpopular

An NBC News and Wall Street Journal national survey in 2016 found 80% of Americans believe the offshoring of U.S. jobs is a major cause of U.S. economic problems.  They also view it as promoting substandard working conditions in the countries where the U.S.takes advantage of what could be termed as artificially low foreign wages.  Of course, the offshoring of U.S. jobs frees up U.S. resources for activities with more value added as well as passing cost savings on to consumers through lower prices and to investors through higher profits.

Need to fill openings in the U.S.?  Contact the recruiters at Smith Hanley Associates.

 

 

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