Gone in the blink of an eye
Berkeley researchers declare 14 million U.S. jobs are at risk of being outsourced.

- - - - - - - - - - - -
By Katharine Mieszkowski

Nov. 5, 2003 | If every white-collar job that could be easily outsourced to Russia, China and India goes the way of the customer-service call center, 14 million positions will be eliminated in the United States, according to "The New Wave of Outsourcing," an academic study released in late October.

Researchers Ashok Deo Bardhan and Cynthia A. Kroll at the Fisher Center for Real Estate and Urban Economics at UC-Berkeley's Haas School of Business calculated that some 11 percent of all U.S. occupations are "vulnerable" to outsourcing.

While Bardhan and Kroll stress that this figure represents the "outer limit" of how many white-collar jobs could soon migrate from the United States, their research also notes just how easy it is to relocate operations that require little infrastructure. The incentive to do so is huge: An American computer programmer is paid, on average, $60,000 to $80,000, while a coder in India makes $5,880 to $11,000.

The report highlights in bright color two pressing questions. In this century, will Silicon Valley become the faded symbol of a race-to-the-bottom global job market in the same way that Flint, Mich., and its fading car-manufacturing factories did in the last? Or, will globalization bring new opportunities to developing economies that desperately need them? Salon spoke with Bardhan on the phone from his office in Berkeley, Calif., about the implications that outsourcing has for the U.S. labor market and the world.

You refer to a widely quoted figure from Forrester Research that states 3.3 million jobs are likely to be lost in the U.S. to outsourcing by 2015. But you suggest that Forrester's estimate is low. Can you talk about why you think it's a conservative prediction? And how you came up with your own numbers?

Usually, we look at the economy along verticals, along industrial sectors. [This time] we decided to analyze it along occupational lines, since computer programmers exist in the computer industry, but they're also employed in the banking sector and elsewhere.

We went through all the 800-odd occupations that make up the U.S. labor market. Then we used a kind of heuristic, a rough-and-ready algorithm, to see what occupations are the most vulnerable to outsourcing. The attributes that we used are things like there is no face-to-face customer-service requirement. The job should be Internet enabled. It should have high information content. There should be a significant wage differential between the U.S. and abroad.

We narrowed it down to those occupations where already some outsourcing has either occurred or is being planned. Then we added up. What are the total number of jobs in these occupations?

That's how we have arrived at the 14 million figure. I want to stress that we really don't want to make too much of this 14 million figure. People are really getting scared.

The main issue here is simple, really. These are white-collar jobs that are vulnerable to outsourcing. One way of looking at it is: If one payroll job can go, so can another.

And, then, looking at it from the other side, which countries are acquiring all these outsourced jobs? Together, the three large emerging markets -- India, China and Russia -- produce nearly three times as many science and engineering graduates each year as the U.S. Now, the educational levels at least at the basic science and engineering graduate level are pretty good. In the case of India, you have the additional advantage that English is the main language of business, communication and media. You also have a kind of institutional similarity in many cases. For example, India has, broadly speaking, the same legal system and similar accounting standards.

Then you have these really large wage differentials. When you have a wage differential of five to 15 times between the U.S. and these countries, and if the job can relatively be done at the same level of skill and productivity, there's no question that it makes the job market here vulnerable in the medium term.

So do you think the outsourcing of white-collar jobs is actually being under-hyped by the media?

. . .