‘Developed countries will outsource 4.1m jobs by ’08’

AGENCIES[ FRIDAY, JULY 15, 2005 01:51:35 AM]

WASHINGTON: The number of service jobs outsourced from the industrialised world to low-wage countries is expected to surge to 4.1m by ’08, according to a study. But the authors of the report argue the trend will have only a small effect on workers in wealthy nations because it will affect a relatively modest percentage of the workforce. “Labour markets in developed economies are experiencing and will continue to experience the trend toward offshoring as a slow, evolutionary change,” said the report by the Mckinsey Global Institute released at the Institute for International Economics. “It will have less impact on patterns of employment than the decline in manufacturing employment developed economies have experienced recently.” Still, the study underscored the inexorable shift of many jobs — especially in sectors like engineering and computer jobs — from the US and Europe to countries like India, China and the Philippines. “These are very profound changes that will alter the (global) labour market dramatically,” said McKinsey’s Diana Farrell, main author of the report. “But they will not happen overnight.” McKinsey estimated that about 1.5m service jobs were outsourced from rich countries to the developing world by the end of ’03. Still, this is only a fraction of the ‘potential’ 160m jobs that ‘could be done by people located anywhere in the world’ — about 11% of the global service workforce. The main factors holding down the use of outsourcing are the lack of suitable skills in developing countries, and companies reluctant to shift jobs for cultural or other reasons

McKinsey calculated some 33m young professionals with university degrees and work experience in 28 low-wage countries. But it said only a fraction of these people have the language, cultural skills and other capacities to work at a multinational corporation. Ms Farrell acknowledged that there is ‘high anxiety’ in the wealthy countries about the future of jobs in engineering and software, the sectors most affected by outsourcing. But she said there are already signs of possible shortages of engineers in some locations like the Indian high-tech centres of Bangalore and Hyderabad. “This is one area where demand is going to outpace supply,” she said. Overall, Ms Farrell said the ability to shift jobs to take advantage of cost savings “is a good thing for economic prosperity,” but added, “it does leave a lot of fallout.” “The moderate impact and generally slow pace of offshoring will not soften the blow for those individuals in developed countries who do lose their jobs as a result,” the report said. “However, most are college graduates, and therefore likely to be more amenable to retraining than manufacturing workers. And in the US, growth rates in both wages and jobs in the computer and data processing services sector, where offshoring is prevalent, are higher than in the economy as a whole.”