On the measurability of offshorability (Why 25% of American jobs are can be done overseas)

VOX ^ | 10/8/2009 | Alan S. Blinder

[SeekAndFind]

Fear of offshoring may force its way back onto policy agendas soon. This column uses a survey of individual workers to measure the offshorability of particular jobs and says that about 25% of US jobs are offshorable. Surprisingly, routine tasks are not more offshorable but those held by more educated workers are.

Although overshadowed by the financial crisis and the world recession right now, the debate over offshoring – that is, outsourcing work to foreign (often poorer) countries – seems poised to stage a comeback as a public policy concern in the not-too-distant future. Indeed, with so much protectionist talk and some protectionist action in the air, fear of offshoring may force its way back onto the policy agendas of the US and other rich countries sooner than we think.

It seems axiomatic that both the economically appropriate and the politically feasible policy responses to offshoring should differ depending on whether the share of the workforce holding offshorable jobs is, say, 2%, 25%, or 75%. In the 2% case, we should probably ignore offshoring as a detail of little consequence. In the 75% case, we should perhaps be seeking radical solutions to the manifold problems caused by massive job dislocations. But if a number nearer to 25% is more plausible, as argued here, the situation probably calls for certain marginal (and some not so marginal) policy adjustments – but certainly not panic. Thus it seems important to obtain a rough empirical handle on this number, slippery though the concept of offshorability may be.

[SeekAndFind]

After looking at 3 studies that measure job offshorability, here's the the conclusion made :

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Strikingly, and surprisingly, all three measures agreed on the overall macro number – roughly speaking, 25% of US jobs are offshorable. At the micro level, the three measures agreed on the classification (offshorable or not) of a specific person’s job in 70% to 80% of all cases. In studying the detailed responses, we concluded – not surprisingly – that professional coders provided the most accurate assessments of offshorability. That is encouraging news because it implies that the Census Bureau in the US and similar agencies in other countries could easily start producing data on offshorability on a routine basis – probably without changing their survey instruments much, if at all.

In terms of major substantive results, we found that more educated workers appear to hold somewhat more offshorable jobs and that offshorability does not have many statistically significant effects on either wages or the probability of layoff. Perhaps most counter-intuitively, we found that routine work, in the sense defined by Autor et al. (2003), is no more offshorable than work that is not routine.

[Buckeye McFrog]

the political class has been trying to hold back this tide for years, but in the current environment I think the backlash is going to prove too strong too resist. The Architects, Engineers and IT folks who didn’t seem to care when some autoworker’s job got outsourced to Mexico are now jumping into the Ross Perot Brigades with both feet. Smoot-Hawley here we come!

In India they get it. One of their top concerns is what to do not IF the US moves to curtail offshoring, but WHEN.

[businessprofessor]

We are on a path of non competitiveness in tax policy, labor policy, environmental policy, litigation policy, and education policy. Offshoring is a symptom not the cause of problems. The cost of labor and investing have risen dramatically with rat control. If left with reasonable government influence, the US workforce is the most productive in the world. Unfortunately, we are headed for Draconian influence.

[dirtboy]

I disagree with your premise. In my experiences regarding offshoring, it is driven by corporate bean-counters trying to lower short-term costs. Period. And in the two instances I have direct experince with, it did not go terribly well. But as long as it saves a few bucks on the bottom line, who cares if quality suffers?

Smart companies do. Dumb ones do not.

[henkster]

“We are on a path of non competitiveness in tax policy, labor policy, environmental policy, litigation policy, and education policy. Offshoring is a symptom not the cause of problems.”

Exactly right. All socialist democrat policies. Welcome to the subservient 3rd world. But that’s what you get when you elect corrupt marxist America-haters.

[KC_Conspirator]

What a bunch of ivory tower stupidity! I have heard this crap all before and you will find that there is never a mention of the word "quality" (except in a footnote here). Quality always suffers when outsourcing American jobs. But nothing matters but the bottom liiiiine.

However, with the current bunch of economic illiterates running congress and the white house, why would anyone start or expand a business in this country?

[SeekAndFind]

In India they get it.

India's day will come as well and they should be prepared for it.

I remember when I was in Asia in the 80's, Taiwan was considered an outsourcing hub, especially for manufacturing. They needed so many heads that they had to import workers from Malaysia and the Philippines.

Guess what ? They can't do it anymore today. Most of their manufacturing work have MOVED to China as their labor cost skyrocketed.

As I said, India's day will come. Salaries in Bangalore for instance are already soaring.

[dfwgator]

I disagree with your premise. In my experiences regarding offshoring, it is driven by corporate bean-counters trying to lower short-term costs. Period. And in the two instances I have direct experince with, it did not go terribly well. But as long as it saves a few bucks on the bottom line, who cares if quality suffers?

And of course, inevitably when the SHTF, the managers responsible for the offshoring are long gone, and it's up to some other poor sap to clean up the mess.

[Willie Green]

fear of offshoring may force its way back onto the policy agendas of the US and other rich countries sooner than we think.

We're still a "rich" country???

I didn't know that.

Surprisingly, routine tasks are not more offshorable but those held by more educated workers are....
What might our estimate that roughly 25% of US jobs are, in principle, offshorable imply for public policy?

The relative shrinkage of the manufacturing sector in the US (and elsewhere) from about 30-35% of total employment then to under 10% now was somewhat painful, especially in places where manufacturing was concentrated; it fostered some protectionist sentiment and some protectionist measures, and it induced a variety of other ill-considered policy responses. But, broadly speaking, the adjustment did not precipitate any major economic or social convulsions. This experience suggests that a similar-sized labour force adjustment can, once again, be handled by the market system – with some help from government.

I refer to policies like more job retraining, bolstering the social safety net where it needs bolstering

???

So let me get this straight....

Because we're still "rich", we're supposed to downsize and offshore our educated workforce so we can retrain our dumbed-down peons to go on welfare???

WTF kind of policy is that???

Somebody needs to toss Alan S. Blinder into a pit full of rattlesnakes or crocodiles or something. The man is an idiot.

[Marty62]

I found this article in the Krone quite interesting.
The DUMS that run Houston, are turning a blind eye to the coming collapse of the Houston economy.
No need for GAS....no need for JOBS at the refineries.
“CONOCOPHILLIPS SAYS IT WILL REDUCE CAPITAL SPENDING AND SELL SOME ASSETS”

Is ANYONE paying attention?

http://www.chron.com/disp/story.mpl/business/energy/6657619.html

[Willie Green]

In my experiences regarding offshoring, it is driven by corporate bean-counters trying to lower short-term costs. Period.

Myopic corporate beancounters (and Wall Street bankers) are merely "useful idiots" for long-term marxist planners like Blinder.

[Campion]

One thing Obama’s destruction of the dollar will accomplish is to make offshoring much less attractive. Of course it does that by lowering Americans’ real wages, and standard of living.

[Willie Green]

Is ANYONE paying attention?

Thanks for the heads-up...
If other Oil Companies follow suit, the reduced capacity will drive up the price of oil and increase Industry Profits.
What's good for the Oil Industry is bad for consumer's wallets at the pump.
We should've been building electrically powered mass transit systems a lot sooner than now.

[Marty62]

Well IF the idiots that run Houston were SERIOUS about mass transit trains. This city would be full of Train tracks.
I noticed in Dallas the Trains are protected from the stupid drivers. In Houston any fool can make a turn in front of a train. As ususal Dums NEVER pay attention to the UNINTENDED consequences.

[Willie Green]

As ususal Dums NEVER pay attention to the UNINTENDED consequences.

They probably figure that, under Cap & Trade, there won't be any cars to run into.
But we're caught in a crossfire between two extremes.
I figure a few fender-benders is better than getting robbed at the gas pump.

[gathersnomoss]

Drill Here, Drill Now. Watch the economy and jobs improve.

Nah, never happen!

[Marty62]

I know, but it just makes me angry when you see how poorly ran the system is now. I take the train down to the Med Center. (refuse to pay $12 bucks to park) Half the time you don’t know if your card is actually deducting the cost. etc etc. AND riding with the homeless trying to get out of the heat is problematic.
Never had a problem BUT did you hear NOW they are talking about HOUSING the homeless to get them out of DT. ALL Dums think alike.
I actually want a train system. but I don’t trust these guys to do it right.

[businessprofessor]

You are too myopic in your perspective. I do not doubt your observations and decision making time horizons. These policies have major impacts on short-term costs. The immediate impacts of these laws are often difficult to measure. The long term impact will be unmistakenable however. The Lilly Ledbetter law is a good example. Over time, litigation associated with this law and new regulations and practices necessary to comply with the law and avoid litigation will have a major impact on hiring and retention of good talent. Corporate decision makers will take notice and move work to locations without these restrictions.

[Willie Green]

Never had a problem BUT did you hear NOW they are talking about HOUSING the homeless to get them out of DT. ALL Dums think alike. I actually want a train system. but I don’t trust these guys to do it right.

I know what you mean about the homeless.
I saw quite a few of them sleeping in the parks DT when I had to go there for Jury Duty.
They didn't cause me any problems, but just the same, I don't really have a humane answer as to how to get rid of them.

Still, it would've been nice if we had a better transit system downtown. I live in the NW suburbs and try to avoid DT simply because I don't like being "lost" when I'm driving. I'd probably go DT more often (if not for Jury Duty, then maybe ballgames or other "cultural" entertainment) if it wasn't such a PITA to go there.

[algernonpj]

Myopic corporate beancounters (and Wall Street bankers) are merely "useful idiots" for long-term marxist planners like Blinder.

Never quite thought of it that way, but spot on!