| Offshoring of American Jobs: What Response from US Economic Policy? |
| Jagdish Bhagwati and Alan S Blinder, The MIT Press, 2009, 141 pages, £14.95. |
| Less than three years ago, when economies on both sides of the Atlantic were enjoying full employment and a group of economists gathered at Harvard for the symposium which provide the chapters for this book, offshoring rather than a global slump in demand was popularly perceived as the number-one threat to many people’s jobs and pay prospects. But although for the moment unemployed workers in Boston or Bridgend are more likely to blame their plight on bankers than on workers with jobs in Bangalore or Beijing, fear of the consequences of globalisation is never far from the surface. The issues raised and debated in this book are therefore just as relevant to the post-crash era. |
| It is tempting for economists to dismiss concern about offshoring as exaggerated. As Jagdish Bhagwati and those who support his position in the debate point out, the significant shift in investment and jobs from developed to emerging economies since the 1970s has improved overall economic welfare without causing mass unemployment in the west. The transition may have been painful, with losers as well as winners, but much less painful than the transitional impact of technological change which most studies show has played the major role in driving down demand for unskilled labour in developed countries. Moreover, and here is the core of Bhagwati’s view, insofar as offshoring does mean some people lose out the appropriate policy response is to help them cope with change, not prevent jobs from being offshored. |
| However, in distilling debate about offshoring into a defence of the case for free trade Bhagwati somewhat misses the point of Alan Blinder’s equally forceful analysis. Blinder is no protectionist. His argument is simply that offshoring will in the coming decades prove ‘a big deal’ for the US economy. Advances in information and communications technology mean workers providing services that can be delivered electronically without face-to-face personal interaction can be located wherever an employer chooses. Blinder estimates this makes up to 40 million US jobs (29%) potentially offshorable (which corresponds to more than 8 million jobs in UK terms). |
| Acknowledging the riposte of his critics at the symposium, Blinder admits that this doesn’t mean the US will offshore anything like this many jobs, or experience a big net fall in employment in the future. His main concern is that the impact will nonetheless be substantial and that the transition will make losers of relatively well-qualified as well as less-skilled workers. As a result, the traditional policy mantra that education and training is the best response to structural unemployment may have to be nuanced so that more workers acquire skills for jobs that require the personal touch and aren’t susceptible to offshoring. |
| I enjoyed this book. It’s good to see a robust discussion of different viewpoints with no punches pulled. And while I too have some sceptic-ism about Blinder’s position on offshoring, his argument and that of the other contributors made me reflect seriously on my own previously held viewpoint on the subject. |
John Philpott
Chief Economic Adviser, CIPD |