Into Thin Air

Whether you believe such dislocations are ultimately good or bad, they're here, they're real, and they're happening at speeds and levels unforeseen just a few years ago. In December 2003, IBM decided to move the jobs of nearly 5,000 programmers to India and China. GE has moved much of its research and development overseas. Microsoft, Dell, American Express, and virtually every major multinational from Accenture to Yahoo has already offshored work or is considering doing so, with 40% of the Fortune 500 expected to have done so by the end of this year, according to the research firm Gartner Inc. The savings are dramatic: Companies can cut 20% to 70% of their labor costs by moving jobs to low-wage nations--assuming that the work is of comparable quality.

Equally dramatic are the displacement, downward mobility, and suffering of the people left behind. So far, at least, that enhanced productivity hasn't translated into jobs at home. Offshoring is steadily eating its way into the educated classes, both in the United States and elsewhere, affecting jobs traditionally considered secure. People whose livelihoods could now be at risk include everyone from IT experts to accountants, medical transcriptionists to customer-service representatives. In IT alone, Gartner estimates that another 500,000 positions in the U.S. may leave by the end of this year; in one scenario, as many as 25% of all IT professional jobs could go overseas by 2008. If just 40% of those people never find another job in their field, that could be more than 1 million whose careers are altered forever.

The implications of this colossal transformation are only just beginning to be understood. This time around, these categories cover a much greater share of our economy; manufacturing accounts for just 14% of U.S. output, while services provide 60% and employ two-thirds of all workers. "It's happening much faster [than in manufacturing]," says Cynthia Kroll, senior regional economist at UC Berkeley's Haas School of Business. "There are fewer capital investments required in outsourcing a services job." Kroll cowrote a recent study that pegged the current number of jobs vulnerable in some way to offshoring at a stunning 14 million.

Wait a second. Wasn't it this transition to a service economy that was supposed to give us a lasting edge over our global competition? And weren't technology jobs supposed to offer a secure refuge to other displaced workers? So far, things haven't worked out that way. There are now millions of trained and educated people abroad who can do many of our jobs at a fraction of the price. And this upheaval has many people worried. "Industrialization happened and people moved from farms to factories," says Marcus Courtney, president of the Washington Alliance of Technology Workers. "In this round of globalization, people aren't moving to anything. Skills do not grant one immunity." Some argue that the shift will free resources for the innovations that will create the next big boom; others see it as an admission that our competitive advantage is gone. "More than just outsourcing IT or anyone's job, we're outsourcing the American middle class," says Bronstein.

It's no surprise, then, that offshoring is suddenly one of the hottest topics around. Presidential hopefuls like John Kerry have waded into the debate, and the media have leaped onto the subject. Even CNN's Lou Dobbs--hardly a bleeding heart--has jumped in with his "shame on you" list of companies that have moved jobs overseas. Blogs and Web sites such as YourjobisgoingtoIndia.com have sprung up to rail against evil corporate interests, and some antiforeigner groups have seized on this issue as a way to promote their beliefs. Offshoring has reenergized an ugly strain of nativism in the United States, with anti-immigration groups using it to argue against work visas. Other groups, often company-sponsored, use the dirty word "protectionist" against opponents. The din grows louder every day.

Yet much of this discussion is beside the point. Offshoring is here to stay (as long as the cost savings are for real) and there's little point in hand-wringing over whether it should or shouldn't take place. Equally useless--and disingenuous--are the bland, marginally empathetic statements of business leaders alluding to the "short-term pain" as if it were a stubbed toe or a nick from shaving. When contacted, some companies refused comment, while many confirmed that they had moved some jobs overseas or said some losses were simply the result of layoffs. A Microsoft spokesperson, for example, disputed one person's claim to have been offshored, saying it was just "part of the ebb and flow of business." Drowned out in all the hype are the voices of those on the bleeding edge of the change--the real people caught in the crosswinds of this massive global shift. The macro outlook seems irrelevant when the goal is to pay the rent.