Outsourcing Our Future—A Perspective in the Year 2018
1 Jan, 2004
By: Keith William FivesonBy 2018, 3.3 million back-office jobs in the United States will migrate to other countries, including India, the Philippines, the Caribbean, China and even Russia, according to Forrester Research, a technology research company in Cambridge, Mass. Gartner Group, has also described offshore outsourcing as "an irreversible mega-trend". They recently said that as many as 500,000 information technology jobs might disappear from the United States by the end of 2004. Of the people whose jobs are moved, the study said, fewer than 40 percent will find other work with their current employers. That could bring the total job loss, not including other sectors, up to 3.5 million, which includes 3 million jobs lost over the past three years.
If you are like me, you might be wondering what the future of jobs and the United States will be. The topic has been broadly debated in state Senate committees, in Washington, D.C., and in corporate boardrooms across the United States. How will U.S. citizens compete for global jobs, when jobs are no longer based upon geography? This article will explore two possible scenarios, both based on current data. With these alternative possibilities, both the dark and bright side of the current trends will be revealed.
2018: Future Shock?
Shatki Patel has just hung up the phone in India on a financial trade with a client living in Cincinnati, Ohio. Her employer, a multinational financial corporate, has headquarters in the United States, but captive call center/back-office operations are in India, the Philippines, China and Russia. She’s been with them for 18 years and is very successful by Indian standards. Like many of her peers, she has accumulated savings and a nice salary of $35,000 yearly. That’s above average by most Indian standards, but India’s middle class has grown, from 20 percent in 2003 to more than 40 percent in 2018. With a population of roughly 1.25 billion people, that represents almost 500 million people. Fifteen years ago, a young woman was earning $8,000 per year. India’s growth, like that of many other developing countries, has been fueled by service economy jobs from the IT, call centers and back-office area.
In the United States, it is quite a different story. More than 50 percent of the population is above the average age of 55 years. The “boomers” have retired and the stock market suffered, as mutual fund withdrawals hurt many multinational companies. A massive deficit and growing unemployment rate reached levels not seen since the Great Depression. Lack of jobs and sufficient wages for the average white-collar worker knocked the middle class down a rung, forcing many to work for lower wages. A lower-paid, educated work force was needed, leaving people to move from companies like Texas Instruments and McDonnell Douglas to Taco Bell and McDonald’s. The global competition for jobs increased, and companies moved their operations to lower-cost geographies.
Corporate survivability and the bottom-line dictated the flow of jobs offshore. The necessary investments to innovate or to move into new industries never occurred, and incentives for re-education or pioneering research never turned up. The deficit moved into the trillions as the U.S. government focused on fighting terrorism, while citizens battled for jobs lost to offshore destinations. Offshore knowledge workers and lower wages were the battle ground.
Billions of dollars were saved and invested offshore, yet the savings didn’t create more jobs for the American middle class. The result was devastating, as millions of jobs were lost and a large chunk of the middle class collapsed. Jobs moved out, office buildings emptied, and crime moved in. The educational system collapsed, as there were fewer jobs and less incentive to attend college. Many colleges closed their doors. The entertainment industry grew, as music, film and television became the opiate for many. Crime, sex, drugs and other illicit “numb the pain” activities grew, along with the prison system, where many new call center jobs have started to pop-up. The U.S. average income of $40,000/year is just slightly higher than in India, China and the other developed countries. The global village has indeed materialized, and the U.S. is a citizen of the world economy.
2018: A Hopeful New World
Another reality happened over the past 15 years. The “offshore mega-trend” signaled a confluence of events for the United States and the rest of the world. With more than 50 percent of the population over 55, the government lifted strict immigration standards and embraced the offshore model, calling for bilateral trade/investment agreements. Outsourcing was seen as a necessity and global work agreements opened the United States to a surge of new immigrants from India, China and the Philippines. Replacement jobs in growth sectors, such as bio-tech, healthcare, pharmaceutical and nursing professions, required talent from overseas who filled jobs as healthcare workers, doctors, scientist, pharmacist, accountants, coding and billing clerks, and truck drivers. The aging of America, coupled with the need for workers in these sectors, started a new “in-sourcing” wave, because there were not enough skilled workers in the United States, and people from around the world wanted to move to the United States to own land and start a new life.
Predicted by the Bureau of Labor Statistics, the civilian workforce grew by roughly 17 million people, while the number of jobs grew by 22 million. About 10 million people were needed as these new jobs were created. Along with outsourcing, additional workers were brought in from overseas, as there were not enough skilled people to do the work needed. Occupations requiring a postsecondary education rose from 29 percent in 2000 to 42 percent in 2010. In 2018, this number increased by another 10 percent. The number of four-year college degree students in the United States continued to drop, as college costs continued to rise. The largest 250 U.S. companies, which employ about 18 percent of American workers, took it upon themselves to “cross-pollinate” workers from offshore to onshore geographies. Multinationals worked with U.S. government officials to adopt “global citizen” policies to promote foreign direct investment and immigration to the United States.
2018: The Reality
Who knows what the future will bring? It will probably be a blend of what we know, mixed with the unexpected. People will grow old, migrate and globalize, and world geo-political strife may give way to bio-technology and virtual reality. World society was quite different just 15 years ago. In 1988, the Internet was still an idea. Snail mail or fax was still the way to communicate with most people around the world. And many small businesses housed only one, communal computer.
Continuing innovations and change make it difficult to predict the world in 15 years. The technology advances of the 1990s made virtual offices and location-independent call centers a reality. Just-in-time inventory and round-the-clock customer service and support operations, without geography, travel and time zones is a reality today.
For now, offshore outsourcing is here to stay, if only because U.S. companies need to continually seek opportunities to enhance their bottom-line and create greater shareholder value. Those companies—with their abilities to bring Internet technologies, digital voice, video and data around the world—will also continue to be an essential part of stronger economic growth and greater investment worldwide. Greater financial integration and innovations will ultimately generate commerce and wealth for developing countries, fostering a better standard of living. And, while there will be cultural challenges, there also will be incredible benefits and opportunities for peaceful change through economic growth.
