It's academic

September 26, 2005

The latest buzz about the shifting of U.S. work offshore stems from recent reports about firms in India providing online tutors to as many as 20,000 American students. India's vast bank of college graduates charges less than U.S. tutors, and in such subjects as math, they aren't having much trouble bridging the cultural divide. Is this the latest sign of the sky falling on the 75 percent of U.S. workers in the service sector who have watched the flight abroad of manufacturing with too much confidence?

Until recently, it was widely assumed that mainly jobs that could be described by simple rules - fielding questions at call centers or producing software - faced offshore competition. But now engineering, design, financial analysis, medical diagnosis and, yes, even one-on-one tutoring are outsourced abroad - evidence of the newly level global playing field threatening to strip Americans of good jobs at good pay.

The reality, however, is much more complex.

First, America runs a trade surplus in services: It exports more services than it imports, meaning more U.S. job gains than losses. Second, though losses of service jobs offshore are painful (particularly when they're concentrated in certain fields or geographic areas), total losses are relatively small within the overall churn of the U.S. job market: In a good year, America loses about 30 million jobs and gains 33 million new ones; jobs lost to trade amount to less than 5 percent of the total losses.

Last, even in some fields now particularly open to outsourcing, such as engineering, U.S. demand will outstrip the domestic supply, predicts a recent report by the McKinsey Global Institute, a think tank run by the consultants of the same name. In another vulnerable sector, computer services, overall job and wage growth still outpaces the U.S. economy as a whole, says Diana Farrell, the institute's director.

Moreover, plenty of signs abound these days of service jobs going wanting. Cities such as Baltimore import teachers and nurses from the Philippines. Maryland schools can almost guarantee auto technician students jobs in which six-figure incomes are a real possibility.

Still, as the rise of offshore tutoring indicates, it's a very safe bet that more U.S. workers will face competition from abroad (and perhaps downward pressure on their wages). To thrive, more U.S. workers will have to acquire certain skills that can't be done remotely (fixing cars or tending patients) or that are so valuable that they justify relatively high U.S. wages. The emerging global services market is increasing the gains from more education; studies show the fruits of trade mainly accrue to the less than 30 percent of U.S. workers with college degrees.

Too often, concern over the outsourcing of U.S. jobs turns protectionist, sidestepping the very difficult heart of this problem: weak U.S. schooling - which, in international comparisons of high-school graduation rates and of literacy, math, science and computing achievement, falls short. No wonder top CEOs warn that the United States is losing its technological lead: China and India now train more engineers than America, and the majority of U.S. graduate science and engineering students are foreign-born.

To compete with lower-cost offshore workers, U.S. service workers have to offer higher quality; this requires far greater investment in America's human capital. We've met the enemy here, and by and large it's not lurking offshore but just around the corner - in our schools.

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