Off shoring of American Jobs
1. Outsourcing offshoring
Offshoring is a situation where a job is transferred from one country to another. On the other hand outsourcing is a situation where a company contracts another company to perform a task or tasks on its behalf.
2. Kinds of jobs are at stake with service offshoring.
These jobs include accounting, security analysis, advertising, and typing services
A. personally-delivered services vs. impersonally-delivered services
The personally delivered services are non tradable services that require direct contact with the customer. The possibility of delivering these services electronically without degrading the quality is low .e.g. surgery and child care. On the other hand impersonal services can be delivered electronically from far while the quality of the service is not degraded.
B. non tradable services vs. tradable services
Non tradable services are the services which cannot be performed without a direct contact with the customer. This service cannot be delivered electronically or by another person on behalf of another. Tradable services can be delivered electronically without degrading their quality.
3. Why Blinder thinks service offshoring could be Big Deal for U.S. workers (not justfree-trade business as usual)
Blinder is worried because service offshoring will negatively affect the many Americans who now earn their living providing services, the technology improvement will lead to the range of services delivered electronically and the growth of the number of Chinese, Indian and other workers capable providing services which can be delivered electronically will continue to increase. How did Blinder arrive at his estimates
Uses data from ONET to create a subjective ranking from 100 (most offshorable jobs) in descending order. In deciding offsharability he used the degree of electronic transmission and quality degradation caused through the electronic transmission of the job. He considers importance of the face-to face contact as negative indicator of offffshorability. Using this criteria Blinder assigned numbers between 0 and 100 that indicated potential offfshorability of each occupation. He then used the numbers to draw a histogram with Y-axis representing employment distribution and X-axis representing the offsharability index. By counting from right hand tail of the histogram he came up with the number of potentially offshorable jobs.
Big political issue
The white collar jobs e.g. accounting, editing and radiology are about to be displaced through offshoring which is an occurrence likely to create political outcry from these workers. Unlike the white collar jobs the blue collar jobs have been exposed to the offshoring for decades. English is most used language in electronically delivered services and this will result to both gains and losses to English speaking countries like U.S. The policy Blinder postulates that, the Trade Adjustment Assistance (TAA) records have been miserable. It has not been generous. It has been emphasizing on assistance rather than adjustments. It has also serves a very small number of people. T.A.A has not been the government priority. It has neither been well advertised nor properly designed.
Policy in that will extend a hand to all displaced workers will serve best. Better unemployment insurance, more generous earned income Tax Credit (E.I.T.C), universal health insurance, wage-loss insurance and greater portability of pensions will be a great relieve to workers who lose their jobs. However, a strong strategy that will make sure that displaced workers are back to productive activities should be emphasized.
The future work force
The demand for labor has shifted to college students leaving away the high school graduates and drop outs causing rising income inequality leading to skilled biased technical progress. The next 30 years call for preparing the future labor force for high-end personal services occupations that will not be offshored. Government responsibility
The education system that encourages innovation and creativity should be encouraged by the U.S. government. The invention of new goods and services, business creativity will provide jobs for the future generation.
The debate
Freeman and Kletzer agree that something unusual is going on. Bhagwati perceive as if Blinder is against trade. The labor markets of US have experienced evolutions normally. The 1970-80s labor market evolution saw the creation of many jobs in service sector. Today the services which are impersonal are being taken up by other countries. This will necessitate another evolution to counteract these. The estimate of jobs by Blinder is crude. It is also subjectively done. Kletzer suggest that high-value work should be emphasized although concurs with Blinder that something loss of jobs to offshoring is happening.
China and India As postulates by Fisher (2008), China and India are one of the most growing developing economies. These countries have a large population with large G.D.P but relatively low per capita income.
The Per capita income has climbed to 4,766 and 2,534 for China and India respectively. China has specialized in manufacturing sector which is served by the cheap labor from the large population. India has specialized on services provision using her large English speaking labor force.
The agricultural sector is not developed so much as compared to service sector. These countries have been opening up their economies. China has also invested so much in infrastructures development as well as technological innovations. India has invested in service delivery to tap jobs from current offshoring of jobs that is happening in rich English speaking countries. China is faced with shortage of raw materials to supply the manufacturing sector. Political challenges include the call for more democracy which has not been well developed by current regime.