Services Oshoring72 Monthly Labor Review • December 2008
It is important to note that this article addresses only the movement o work rom the United States to othercountries; occupations that may be aected by fows inthe other direction—a movement known as “in-shor-ing”—are not identied. In general, occupations that aresusceptible to being oshored are not necessarily the sameas those which may be aected by in-shoring.Current measures o services oshoring are limited by adearth o relevant data. Perhaps the most useul indicatoris the international trade data rom the Bureau o Eco-nomic Analysis (
). Over the last two decades, thesedata show a large increase in international trade in bothgoods and services. In 1986, goods exports were $229.2billion, while goods imports were $401.8 billion. By 2006,quantities had more than quadrupled, to $928.7 billionand $1.65 trillion, respectively. In 1986, service exports were $128.9 billion, while service imports were $110.7billion. By 2006, service exports had nearly tripled, to$386.3 billion, while service imports more than doubled,reaching $283.7 billion.
It is noteworthy that, althoughthe U.S. economy has been running an overall trade decitor decades, there has been a consistent surplus in interna-tional services trade.Measures o the value o international trade, however,cannot be used to gauge the scope o oshoring. An in-creasing surplus in services trade, or example, does notnecessarily indicate a change in the level o oshoring inservice occupations. In addition, the value o services tradeusually is dicult to measure. Tis situation stems romthe act that goods, as opposed to services, are easier tomeasure and dominated international trade when the datacollection systems were established.
In addition, goodsare typically traded through a port o entry and are trackedrelatively easily. Services, by contrast, are traded throughdiverse channels, many o which are dicult to observe.A number o organizations, including Forrester Re-search, McKinsey Global Institute, Deloitte and ouche,and Goldman Sachs, have published studies trying toquantiy the eects o oshoring on U.S. employment.Most o these studies predict that millions o jobs couldbe oshored over the coming years. Academic economistsalso have published studies estimating that millions o U.S. jobs are susceptible to oshoring.
All o these stud-ies acknowledge the dearth o actionable data on the topicand are based on subjective assumptions. Te manner in which oshoring will aect U.S. em-ployment is unclear. On the one hand, oshoring hasthe potential to reduce total U.S. employment i jobs arerelocated to other nations. On the other hand, servicesexports may create new jobs within the United States andthereore raise total employment.
In addition, individualoccupations are not likely to experience these eects uni-ormly, because some occupations are more susceptibleto oshoring than others and some may ace additionalbarriers to oshoring. I individuals lose their jobs in vul-nerable occupations, they may need to obtain retrainingbeore moving into another occupation. As a result, it isimportant to identiy which occupations may be aectedby oshoring.Several studies have addressed services oshoring roman occupational perspective. Common among them is anattempt to identiy the characteristics that make an oc-cupation susceptible to oshoring. Ashok Bardhan andCynthia Kroll, among the rst to do so, concluded thatoshorable occupations have “no ace-to-ace customerservicing requirement,” “high inormation content,” a“work process” that is “telecommutable and Internet en-abled,” a “high wage dierential” with a “similar occupa-tion” in the oshore destination, “low setup barriers,” anda “low social networking requirement.”
On the basis o these characteristics, and using the Standard OccupationalClassication (
those authors identied 49occupations as susceptible. Te majority o these occupa-tions all into three
occupational groups: oce andadministrative support occupations, business and nancialoperations occupations, and computer and mathematicaloccupations. Bardhan and Kroll used data rom the
Occupational Employment Statistics (
) survey to es-timate that these 49 occupations accounted or 14 mil-lion jobs, or 11 percent o total employment, in 2001. Teauthors limited their list to occupations that the businessliterature indicated were already being oshored at thetime o their analysis, which may explain why the numbero occupations identied in Bardhan and Kroll’s study islower than the number identied herein.In an attempt to determine which jobs are able to beoshored, and the number o jobs that could be oshored,Alan Blinder created an occupational ranking system.
Hestated that services which can be transmitted electroni-cally with no reduction in quality can be oshored andall other services cannot. Most occupations, however, pro- vide some services that can be transmitted electronically and some that must be delivered in person. Consequently,some occupations are more oshorable than others, creat-ing an oshorability spectrum. Blinder’s system, based oninormation rom the Occupational Inormation Network (
in addition to his own judgment, assigned eachoccupation a position in this spectrum. He then used theresults to estimate that about 291 occupations are o-shorable. Blinder based his occupational classications on