The Jobless Recovery

This article asks if this is really a jobless recovery, or a fundamental shift in the way companies are run. The article notes that productivity increases from technology and offshoring have been major drivers of growth, but that sooner or later companies must hire.

Still, offshoring can only take U.S. companies so far. Aron says his research shows that it has risks and thus limits. And that means U.S. employers can't just keep moving operations abroad. Eventually, they will have to start hiring, assuming the economy continues to grow. "If American Express outsources 3,000 jobs, you might think, 'Where will it stop?' But AmEx can't outsource 300,000 jobs because of the risks."

According to Aron, "There is operational risk — the likelihood that a process will break down when you move it abroad. There is strategic risk — when you transfer a process to a third party, it can behave in ways that are opportunistic. It might cut costs at your expense, for example. And then there is what I call composite risk — if you outsource too many jobs, you erode the capabilities within your firm." For these reasons, Aron has found that companies typically will limit their outsourcing to about 8% to 10% of their total positions.

Even so, Wharton management professor Steffanie Wilk wonders about the long-term implications of the trend. Initially, low-skill jobs were the ones sent to foreign firms. "But now we are seeing better jobs, even high-tech jobs, going overseas." That creates an obstacle for less-skilled American workers. Before, they could take call-center jobs, for example, prove themselves, acquire more skills and advance to better-paying positions. But with call-center jobs leaving the country, "there's not the ladder that you can climb up," she says. "We lose the chain of jobs that allowed less-skilled workers to get better skills."

I love this debate because it is interesting, much of it is recorded in this blog, and I am young enough to see how it really plays out and who was right. Of course, according to some reports, this isn't an issue because employment has surged.

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