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Jobs continue to migrate
Experts say economy will benefit long term from outsourcing and offshoring
We are living in a global economy. If abdominal pain sends you to the emergency room in the middle of the night, it might be a radiologist in Australia or Switzerland who reads your CT scan in 15 minutes to rule out a serious problem. The medical notes on your case may be transcribed in India.
The mortgage papers on your new house might be processed in China or Kenya. A question about an airline ticket may be answered by a representative in Ireland. And that plane in which you're flying? Most likely its parts were made all over the world, as were the goods you buy at the mall.
"The shift from an agrarian to an industrial economy in America was a slow process, with jobs absorbed over time," said Rajeev Dhawan, director of the Georgia State University Economic Forecasting Center. "The pace to a global economy has been much faster, and trends in outsourcing and offshoring are part of it."
Outsourcing -- the movement of work from in-house employees to outside companies -- began in the '90s, with companies looking for ways to make a profit without raising prices.
"If the activity -- say, accounting -- was not part of a company's core business, it shed that operation in order to succeed in a more competitive market," Dhawan said.
Offshoring -- the movement of work from within the United States to locations outside the United States -- gave companies access to lower labor costs in order to raise profit margins.
Mass layoffs and plant-closing activity peaked in 2001, when 7,375 extended layoff events affected more than 1.5 million American workers, according to the U.S. Bureau of Labor Statistics' mass layoff statistics.
"It began with manufacturing, but offshoring spilled into the service sectors when the Internet and global telecommunications achieved a high level of quality and lower cost in the late '90s," said Roger Tutterow, dean of the Stetson School of Business and Economics at Mercer University. "The Internet changed the way the game is played and broke down the barriers of geography and time."
The trends show that companies are getting more sophisticated in what they're outsourcing and offshoring, according to Tim Mescon, dean and Dinos Eminent Scholar at the Coles College of Business at Kennesaw State University. "It's not just manufacturing and [information technology] or even engineering anymore. Now it's customer care, financial, product design, legal, medical, publishing and film-editing services."
Cutting across all industry sectors, which jobs go and which stay has more to do with what kinds of tasks or services need to be kept close to the point of origin.
"Programming doesn't need to be in-house, but those IT jobs that require relationships with customers or the supply chain do," Tutterow said.
"The U.S. is clearly the biggest user of offshoring, but the [United Kingdom] is second, the [European Union] third, and Japan has become a huge user -- and the numbers continue to grow pretty dramatically," Mescon said.
Work no longer is sent just to India, China or Mexico but also to Belarus, Kenya, Argentina and Canada's Prince Edward Island.
"[Prince Edward Island] couldn't just fish or harvest trees anymore, so that area has a strategy to boost its economy by becoming a call-center location," Mescon said.
Total global outsourcing is predicted to reach $220 billion by 2020, according to a 2006 study by Logica CMG.
In 2005, the outsourcing market was $140 billion.
The shift has caused plenty of short-term pain to blue-
collar and white-collar American workers who have lost jobs. In the long term, however, Mescon predicts that there will be a positive impact in the area of economic growth for U.S. companies.
"Companies like Boeing, who are succeeding in aviation manufacturing by having parts made all over the world, are leveraging activities and development globally to grow their core businesses domestically," he said.
Offshoring doesn't mean a drain of jobs, because other, higher-skilled jobs will be created as a result of companies' expanding with new products and services, said Penelope Prime, professor of economics at Mercer University's Stetson School of Business and Economics. The recent resurgence of engineering and IT jobs supports that thinking.
Even before the Internet transformed business, the world began to change with the fall of the Berlin Wall in 1989, she said. "So many barriers to trade and foreign investment started to fall with it, and we began to see an open, global economy."
American companies make the decision to offshore activities if it makes sense, she said.
"If it adds value, then it's a smart move. Our economy has to stay competitive, retrainable and flexible, which means that this lifelong-learning stuff is for real," Prime said. "The best thing workers today can do is learn how to learn and how to think."
Because it's no longer as easy to predict where future jobs will be, Mescon tells students to manage their careers and not look to one employer to provide them with all the skill sets they'll need.
"They need to keep their eyes open and stay ahead of the game," he said.
Some positive signs that workers are making the shift: Continuing education is booming, and "we're seeing a mini-explosion in entrepreneurship and a continued interest in franchising," Mescon said.
"In Atlanta, we're looking at an amazing array of shifting markets and entrepreneurship opportunities."
