Fraters Libertas

They Say These Cubes Are Going Boys, And They Ain't Coming Back

Instapundit linked to this piece at Fortune.com on the white collar unemployment situation which shows no signs of improving. And it might be related to larger trends not necessarily connected to the current economic down turn. Which means that even when the economy recovers the job market for white collar employees might not. The article mentions a couple of factors that are contributing to the weak white collar job market but the one that caught both Glenn's and my eye was that firms are increasingly "offshoring" white collar positions in countries like India and the Philippines. What began with companies moving call centers to these "low cost" countries has now expanded to include jobs in the financial services industry, IT, and even health care.

In principle I support the idea of free trade and resist government imposed restrictions designed to "save" jobs and "protect" industries. These efforts have usually proven fruitless in the long run and only served to hamper competitiveness and efficiency in markets. But I have to admit that I consider the future potential future ramifications of this trend towards "offshoring" to be very disturbing and somewhat frightening.

I work for a manufacturing company that is very focused on costs. We have already relocated one of our plants to Mexico in order to lower labor costs. The only reason we still have manufacturing operations in the United States is that the size is small enough to make any move out of the US economically unfeasible (the cost of the move would be greater than the savings from lower labor costs). We purchase our electronics from Asia to minimize costs and are constantly searching for new vendors in low cost countries. There have also been talks of establishing a multidivisional call center in the Philippines for our customer service needs. At this point we still design all our products in the US but there have been discussions about using engineering resources in India on a limited basis on some projects. I expect that we will continue to expand our efforts in these areas.

As Glenn says in his post no job is safe. I work in materials management but is there any reason that in the future a qualified replacement could not be found for me in India? With many of our suppliers already outside of our local geographic area proximity is not necessary. Today I help manage the inventory at our plant in Mexico from thousands of miles away. With e-mail and linked information systems the need for personal contact can be minimized and in those situations that require it, video conferences can be substituted. I can see the day when most of the work performed by those in materials/supply chain management could be "offshored".

What of other departments? Accounting is already being done in India and other than perhaps retaining a CFO for critical decision making why couldn't most accounting resources be moved as well? Engineering would be more difficult as there is so much specific knowledge that each engineer possesses that would be tough to easily pass on. But companies are increasingly seeking out ways to share this in house wealth of information and improvements in knowledge sharing software are making it easier. At first you could likely only shift the "grunt work" that is typically done by the lower level engineers (the new guys). But as time went by and the group overseas expanded its knowledge you could hand off increasingly more complex projects slowly weeding out the numbers of your US engineering group until you were left with a small core of senior engineers to handle the most challenging projects. In time they too could prove disposable.

With far fewer employees you wouldn't need to have much of an HR department. Not much need for quality, safety, or facilities folks either. Sadly, depending where your markets are, the one group that might survive somewhat unscathed would be marketing. Like the cockroaches they are you just can't seem to get rid of them. Although if all the work on manuals, literature, brochures, etc. were transferred overseas you might be able to squash one or two of them.

You could end up with a sort of skeleton corporation still operating in the US with leaders of the all the departments around to pow wow and make strategic decisions about the future direction of the company with little or no staff reporting to them. This scenario would be the ultimate culmination of "offshoring" and would be a head count wet dream for certain executives that I've come across. Just thinking about it causes me to have nightmares.