Demagoguery or Demographics?

We're in the homestretch of the U.S. Presidential election -- only another 19 months or so of fractious finger-pointing and speechifying.  Expect to hear an earful on outsourcing -- aka, offshoring -- from both sides of the fence.

On one side will be those who point out that the workforces of the West are diminishing rapidly, making outsourcing to the East a necessity. These advocates will also note that we can be reasonably certain of security measures in relationships among outsourcing participants in a truly global economy.

Conversely, we’ll hear from the other side about job losses at home, as well as the exploitation of other countries. 

Both arguments have merit. But only one has the numbers on its side: Falling birth rates in the industrialized world over the last 40 years -- a trend we can't change overnight even if we wanted to -- has resulted in fewer young people being ready to enter the workforce in these markets. Fact is, the center of gravity for the world's global labor markets really is moving east!

In the U.S., fewer than 30% of people in their 20s earn a college degree. The Employment Policy Foundation projects a shortage of over six million college degree holders by 2012. Indeed, two-thirds of new jobs being created in the U.S. call for college degrees, and another 25% call for extensive technical training. It's that simple: Supply and demand are out of alignment, which is why so many employers are turning abroad.

These realities and forecasts are front of mind for senior leaders of the global companies that sell us our diapers, laundry detergent and cars -- particularly since developing-country markets are also where these companies will see their biggest business growth in percentage terms in the years ahead.

So how do these companies put themselves in a good position to sell more products to emerging consumers? One way is by making sure consumers in those countries -- Brazil, China and India, for example -- are all participating in the benefits of a growing economy. And job growth is fundamental to economic growth.

Put another way: Outsourcing is a rising tide that can lift all ships.

That fact may get lost in the months of campaigning ahead, but it's a fact nonetheless. We need to position our economies for the future, not return to the protective behavior of the past.

Comments

[Rajesh Dhuddu, PMP]

It will be interesting to see from a long term perspective the outcome of world's global labor markets shifting to east!

Will this lead to reverse brain drain for Asian countries particulary India with foreigners seeking jobs in these countries?

Already, the phenomemon of Non Resident Indians (NRIs) returning to India after years of work in US is evident. This so much that it has led to another term RNRI - returned NRI, to easily to refer to this set of people.

Or, will it lead to decrease in the value of currencies such as Dollar, Sterling Pound to minimize the scope for labor arbitrage and the resultant decrease in movement of work across the shores?

[Peter Allen]

Rajesh,

I’m intrigued by the potential implications to the global currency balances. That’s an interesting line of potential outcome. Our monitoring of global wages for IT services shows a relative equalization of the rates in various locations. Not yet enough volume to cause currency impact, however.

As for a major shift of populaces … I don’t see this as being a major issue or trend. Executives in companies in China and India alike have observed to me the benefits of repatriotization – it helps with the cultural assimilation. But, aren’t these a relative small number of people in the grand scheme of things?

Thanks for your thoughts!

Peter

[Rajesh Dhuddu, PMP]

Paul,

Number of professionals returning home (estimated to be 100 a week) in India will certainly constitute, relatively smaller group on a global scale.

However, this seems to have caught on the attention especially with many articles being written on how these RNRIs are posing challenges to HR folks in terms of their fittment from salary and position perspective!!

Thanks for the clarifications!