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Will Outsourcing Affect Finance Jobs?

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Reports of high-paying, white-collar jobs being outsourced to cheaper locations like India and China appear frequently in the media. Should outsourcing be a matter of concern for the U.S. finance workforce?

The outsourcing of labor started when textile and other manufacturing jobs were relocated to foreign locations. Then, auto-manufacturing jobs were outsourced, and the American public began to fear negative economic effects. However, innovations and strong economic growth have created better jobs to replace the positions that have been lost.

At present, the same process is going on in the services sector. The optimists argue and experience has shown that the American economy can evolve to create new high-skilled jobs through innovation. Less-skilled jobs will shift from the U.S. to emerging economies. This will result in higher standards of living around the world as workers in developing economies get better-paying jobs. Thus, the cost of production for services will decrease, and U.S. consumers will pay lower prices for services.

This shift in the service sector started with the outsourcing of low-skilled services, such as telemarketing and data entry. Outsourcing has now moved on to jobs that require higher-level skills, although it was once thought that these jobs could not be outsourced.

Another reason for the shift toward outsourcing in the service sector has been the low infrastructure requirements for completing these jobs in remote locations. Companies simply need to purchase computers and Internet access.

"Demystifying Outsourcing," a study published in the December 2004 issue of Finance & Development, says, "The numbers do not support the hype over job losses." It adds, "Outsourcing does not appear to be leading to net job losses—that is, jobs lost in one industry often are offset by jobs created in other growing industries."

The study found that outsourcing of services has steadily increased around the world but is very limited in industrial countries like the U.S. It reports, "U.S. business service imports as a share of GDP have roughly doubled in each of the past several decades, from 0.1% in 1983 to 0.2% in 1993 and 0.4% in 2003." This shows that losses of white-collar jobs currently are not significant enough to worry about.

However, down the road, the job you have planned and studied for may no longer exist because it has been outsourced. Therefore, it is highly probable that members of the U.S. workforce will face career changes in the future. This situation will likely be aggravated by pressure to reduce wages due to competition from foreign labor.

Educating the U.S. workforce should be a top priority if we desire to minimize the impact of this situation. The U.S. should also continuously educate and upgrade the skills of its workforce.

Today, America has an edge on other nations in the areas of information and technology. India and China have larger numbers of students graduating with degrees in engineering and natural science. We face the risk of being overtaken by other nations as skills and education levels rise in developed and developing countries.
On the net:Outsourcing Jobs: Is It Bad?

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