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Commentary: !utsourcing "obs: #s #t $a%&

'n acce(erating pace is raising concerns o)er its e**ects. +wo BusinessWeek economists %ebate whether that,s goo% or ba%
These are anxious times for U.S. workers. Sure, the recovery seems to be getting under way. Yet hardly a week goes by without another report of a batch of high-paying, white-collar obs getting exported to far cheaper locales such as !ndia, "hina, or the #hilippines. !n mid-$uly, !%& ' #$- ( set off a firestorm when news of its plans to move more white-collar obs overseas was leaked to The New York Times. )nd news service *euters announced on $uly +, that it will move -.. or so obs from /ew York, as well as do0ens of other slots in 1ngland, Scotland, and Singapore, to its operations in !ndia. )s white-collar obs move away with increasing regularity, a debate that once focused on the loss of manufacturing to foreign outsourcing is once again raging2 $ust how serious for )merica, its workforce, and its economy is the shift3 Two decades ago, the loss of auto obs and other highpaying manufacturing obs sparked fears of a hollowing-out of the U.S. economy. Yet painful as the loss of those positions were, strong economic growth and innovation created far more -- and better -- obs to replace them. /ow, the same process, many economists argue, is going on in services. Yes, some individuals are losing out as well-educated programmers or engineers can do the same ob for far less halfway across the globe. %ut as the U.S. economy evolves, innovation will create new highpaying obs. 4thers, though, argue that the outsourcing of highly skilled service obs is fundamentally different -- and poses greater risks for the U.S. economy. 5ow worried should we be3 5ere are two opposing views2 ./0... This is no longer about a few low-wage or manufacturing jobs. Now, one out of three jobs is at risk 1conomic evolution is inevitable. "ompanies will always pursue the lowest-cost structure, which means less skilled work will move out of the U.S. to emerging economies. )nd that6s a good thing, because living standards around the world will rise. 7orkers in developing nations will get new and higher-paying obs, and consumers in the U.S. will be able to buy products that are cheaper than if they were made at home. The shift first occurred in textiles and other manufacturing obs, followed by low-end services such as telemarketing and data entry. /ow, it6s moving up the labor food chain, leaving white-collar workers increasingly nervous. !s the angst ustified3 !t6s probably too early to know for sure whether this latest shift in obs is 8ualitatively different from past offshore movements. %ut it certainly feels that way. 4utsourcing is hitting skilled obs that were once thought 9safe9 across a far wider swath of white-collar )merica. 7hat6s more, the new outsourcing is occurring at a breathtaking pace. 4nly a decade ago, writing computer code and software-application maintenance were considered complex and secure ways for aspiring )mericans to make a living. /ow, it6s considered 9rote work,9 and companies such as &icrosoft "orp. and /etscape "ommunications ''!1 ( "orp. have it done everywhere from !reland to !ndia. The extent to which industries are moving a wide array of mid-level professional obs offshore is troubling. 7e6re talking about computers and other high tech, business services, and finance. )dd those industries up, along with factory obs, and you find that one out of three private-sector obs is now at risk of being outsourced. )nd that doesn6t count back-office functions such as accounts

payable, marketing and sales, and human resources that exist in U.S.-grounded industries such as retailing, health care, and recreation. )ll of them could be shipped overseas in the name of cost-cutting. :rom ust-in-time inventories to nanosecond technologies, business practices now turn on a dime. )s soon as work can be made routine -- whether it6s reading an ;-ray or creating blueprints -- the ob can potentially be outsourced. That promises big, and often dis8uieting, changes ahead for many. !t means the career you studied for -- and spent oodles of tuition money on -- in college probably won6t sustain you for your working life. Someone in !ndia or "hina will be able to do it far more cheaply. )nother reason for the speed and si0e of this shift is the nature of service work, especially in our !nternet world. &anufacturers must spend years and billions of dollars erecting plants overseas and setting up distribution chains for supply and shipments before moving work offshore. %ut service obs need much less infrastructure. &any need only a desk, computer, and /et access. To be sure, much of today6s ob itters are rooted in this rudderless economy. %ut a structural change is also afoot that could result in a worsening ob picture <. or <= years down the road. 4verall, the global economy will do much better, but the U.S. workforce may face fre8uent career changes and downward pressures on wages through every part of the economy sub ect to competition from foreign labor. )nd that6s ust as baby boomers will be counting on younger workers to pay a lot of money into the Social Security fund. 7hat can be done now to prevent such a dreary outcome3 There are no 8uick or easy fixes. >egislation blocking obs from moving overseas would amount to <?@.s-style protectionism. 9!t would be foolish to stop companies from outsourcing,9 says *obert %. *eich, former >abor Secretary under #resident %ill "linton. 9!t would make our companies less competitive.9 Some in "ongress suggest tax credits for companies who keep obs in the U.S. The risk there is that companies will extort bigger breaks -- even for positions they never plan to move. !nstead, more attention should be paid to educating the U.S. workforce. )merica is on the cutting edge of the information and technology economy. %ut others are catching up. !ndia and "hina award more natural science and engineering degrees than we do. The only way the U.S. will keep one rung ahead of the rest of the world is to ensure that we have a broadly educated workforce that keeps learning. )t the corporate level, training programs would help current employees move up to better positions. )nd the government should overhaul obless benefits to allow displaced workers the time and money to enter new careers. 4ptimists argue that the U.S. will keep its innovation lead because it has invented new products before. %ut that underestimates the risk of being overtaken as skill and education levels rise elsewhere. Unless we focus on maintaining a better-educated workforce, that risk will only rise. By Kathleen Madigan Business utlook !ditor Madigan still belie"es in free trade.