Abstract:Research Report Fisher Center for Real Estate and Urban Economics · University of California, Berkeley · Fall 2003 The New Wave of Outsourcing Ashok Deo Bardhan and Cynthia A. Kroll T here is growing ...Research Report Fisher Center for Real Estate and Urban Economics · University of California, Berkeley · Fall 2003 The New Wave of Outsourcing Ashok Deo Bardhan and Cynthia A. Kroll T here is growing apprehension among business leaders, economists, and ordinary Americans that we are witnessing what may well be the largest out-migration of nonmanufac- turing jobs in the history of the US economy. This concern has been fu- eled by newspaper reports and eco- nomic news highlighting the layoffs of thousands o people in high-tech, f software and service sector compa- nies in the US, and the practically simultaneous, seemingly coordinated establishment of offices and devel- opment centers, most often in India, resulting in hiring of thousands of new employees in that country. For example, tabulation by the authors of reports in Indian newspapers and business journals for the month of July 2003 alone gave an estimate of 25,000 to 30,000 new outsourcing related jobs announced by US firms. In the same month, there were 2,087 mass layoff actions carried out by US employers resulting in a loss of 226,435 jobs. 1 The jobs being created in India and elsewhere are in a wide range of services sectors such as geo- graphic information systems services for insurance companies, stock mar- ket research for financial firms, medical transcription services, legal online database research, and data analysis for consulting firms, in addi- tion to customer service call centers, payroll and other back-office related activities. In this short overview we address the following questions: Have jobs been transplanted from the US? How sig- nificant is this phenomenon and how sustainable is it? What is the potential impact on future job creation and wage inequality in the US? How is it likely to impact the real estate sector? The First Wave: Outsourcing of Manufacturing Between 1987 and 1997, the share of imports in inputs used in US manufac- turing increased from 10.5% to 16.2% and in high-tech manufacturing, such as computers and electronics, from 26 to 38% (See Figure 1). These data continue a long history of foreign out- sourcing in US manufacturing and the associated loss of blue-collar jobs in many industrial sectors. Indeed, one of the attributes of the modern stage of globalization for advanced indus- trialized countries is the offshore pro- duction of intermediate i puts, usually n in low-cost developing countries. The motivation, on the part of US firms, has been driven by the low costs of manufacturing abroad, primarily in the East Asian countries, such as Tai- wan, China, South Korea, Malaysia and others, as well as the availability of skilled labor, the promotion of a business-friendly environment and the existence of production and supply Figure 1 Imported Inputs as a Share of Total Inputs Total Manufacturing and High-Tech Sectors Imported Inputs as % of Total Inputs Total Manufacturing High-Tech Manufacturing Source: Bardhan, Jaffee and Kroll, Globalization and a High-Tech Economy, forthcoming. Bureau of Labor Statistics.Read More
Publication Year: 2003
Publication Date: 2003-11-02
Language: en
Type: article
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Cited By Count: 173
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