Monday, 9 November 2009

Offshoring and local employment

How do firms who offshore change their local workforce? According to this article at offshoring is one of the reasons that firms, in Germany at least, employ more highly educated workers at home. In the article Sascha O. Becker, Karolina Ekholm and Marc Muendler say
This column, using evidence from German multinationals, shows a positive correlation between offshoring and the firm’s proportion of highly educated workers. Offshoring firms have relatively more domestic jobs involving non-routine and interactive tasks. But offshoring is far from the only explanation for the shift towards more educated employees carrying out more advanced tasks.
The articles authors argue there are two important lessons from their work,
  • First, at the level of the individual firm, offshoring seems to be associated with a shift towards more educated workers. We also report a positive correlation between the increase in offshoring and the proportion of highly educated workers in the firm. Both these results suggest that offshoring is associated with an increased relative demand for more educated workers, as traditional theories would predict.
  • Second, our results support the view that the degree to which jobs involve non-routine and interactive tasks is relevant for their propensity to be offshored.


Jim Donovan said...

This fits with the anecdotal evidence. Genuine multinational operations tend to support high value/high skill jobs in the home country. Offshoring increases competitiveness, which leads to growth which supports greater R&D, marketing, finance, etc. What would be interesting would be an analysis of the supporting firms around the multinational HQ, eg lawyers, financiers, CA firms, advertising, etc. The anecdotal evidence suggests the phenomenon is wider spread than just within the multinational firm itself.

Of course that assumes HO stays at home!

Call Centers in the Philippines said...

Your article is informative and provides food for thought. This makes perfect sense. The phenomenon of offshoring is not really new, but it arouses just as much debate and concern because it is no longer confined to the manufacturing industry and low skills but now involves services themselves, particularly those to business. More recently the jobs affected by recent offshoring also involve more highly skilled jobs.