Alan Reynolds

Economist Alan Blinder wrote in The Washington Post that "offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades. In fact, I think offshoring may be the biggest political issue in economics for a generation."

The telling phrase is "political issue."

"To be marketable in the political arena," Blinder once explained, "an idea must be short and snappy enough to be emblazoned on a T-shirt. But ... any economic idea expressed that tersely is almost certainly wrong."

"Offshoring" is short and snappy enough to attract nativist and protectionist interests, left and right. Blinder's speculations were recently praised by William Greider in The Nation, for example, and by Phyllis Schlafly in The Conservative Voice.

"Nowadays," says Blinder, "a growing list of services can be zapped across international borders electronically. ... We're all familiar with call centers, but electronic service delivery has already extended to computer programming, a variety of engineering services, accounting, security analysis and a lot else."

Blinder is speculating about the next "decade or two," yet the phenomenon he describes is going on "nowadays." Infosys, India's biggest software outsourcing firm, began in 1981 and now employs more than 72,000 worldwide, including employees in 16 U.S. offices. Wipro employs 66,000, including 11 offices in the United States. Perot Systems employs 5,000 of its 22,000 workers in India. If such offshore outsourcing of business services actually risked the loss of "tens of millions" of U.S. jobs, we should have seen some sign of it by now. But we haven't.

In a paper for Princeton's Center for Economic Policy Studies, Blinder selects 22 major occupations in services (out of 291 lesser jobs, which include manufacturing) ranked into four groups according to their "offshorability." In contrast to his press interviews and popular articles, the academic paper makes it clear that he is "guesstimating the number of jobs that might be offshorable, not the number that actually would be offshored. ... Only a fraction of these offshorable jobs will actually be offshored."

His purely subjective list makes it very clear, however, which service jobs are supposedly most threatened. And that, in turn, makes it possible to test his theories against actual job change between 2002 and 2005. I had to estimate the 2002 figure for "business operations specialists, all other" because that classification did not exist until 2004. Those offshorable jobs increased 8.2 percent between 2004 and 2005, but I assumed only a small increase from 2002 to 2004.


Alan Reynolds

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