The latest debate in the Economist magazine’s on the “Future of Work” starts like this: “A spectre is haunting the Western world. The spectre of fear. Fear that the middle classes are losing out, and while their economies may still be growing, the rising tide no longer lifts the majority of boats.” — Jacon Funk Kirkegaard, Peterson Institute for International Economics. According to Kirkegaard, the sky is falling on talent in the West. We cost more, are less productive and are becoming less educated than the workforces in developing nations. For reasons that are less than clear, he believes that “the recently freed markets of the East (namely Russia, China and India) are more than a match for those in the West:” “…the world economy is finally truly global and the implicit protection for Western workers from the self-imposed economic exile of billions of potential competitors is irreversibly gone”.
I wasn’t aware that we ever needed protection. In this line of reasoning, wouldn’t the UK economy have contracted after Eastern European countries joined the EU? Or Canada and the US after NAFTA? As everyone knows, the opposite occurred in both cases.
The proposition that globalization and the “offshoring” of work to developing countries is harming workers in developed “rich” economies is patently false. Employment levels in the UK, North America and Australia, for example, have been higher ever since “globalization”. And, while wage rates have been mostly flat in many rich countries, buying power, mainly due to the availability of cheap manufactured goods from China and elsewhere, has grown.
Workers in rich countries, particularly “knowledge workers” and skilled technical workers, have remained competitive despite more than two decades of globalization and inter-continental free trade agreements. Their competitiveness lie largely in the advantages rich countries enjoy in language, infrastructure, technology, innovation, creativity, and in most cases, productivity.
Since the modern services offshoring industry began in about 1997, unemployment rates for knowledge workers in the US have hovered between 2 to 3 percent, well below what economists define as “full employment”. Employers from Dallas to Manchester to Auckland have repeatedly and consistently bemoaned the lack of domestic talent — despite higher post-secondary enrolment rates than ever — even during the post 9/11 economic downturn. For skilled technicians and tradespersons, simple demographics in rich countries have driven down their supply, increased demand for their services and greatly accelerated their wages. Even for lower-skilled workers in the services industry, employment opportunities abound — it is difficult, after all, to offshore bartending services!
Ironically, today’s spiraling cost of energy is creating a reversal in the fortunes of rich nations’ manufacturing sectors. The manufacturing that has remained in rich countries has created competitive advantages through automation, resulting in more highly skilled competitive workers, by focusing on higher end manufacturing.
Perhaps the best evidence to close this argument once and for all is the fact that the US, Canada, the UK and other rich, Western European countries themselves rank among the top 40 worldwide destinations for offshore work — the US is 11th on the list according to a 2005 evaluation by A.T. Kearny.
To join the debate, please visit: http://blog.thetalenteconomy.com/. Comments are always welcome.
Lori is Founder and President, DNL Global, a talent-management solutions provider. Allan is President and Executive Director, Human Capital Institute.
