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State and Metropolitan Area Impacts of the Offshore Outsourcing of Business Services and IT

  • Author(s): Kroll, Cynthia A.
  • et al.
Abstract

This paper addresses the impact at the metropolitan level of increasing trade in white-collar economic activities. The paper first refines the definition of white-collar occupations at-risk to offshoring. Applying this definition to the national job base shows that close to 15 million people, or 11.7% of the employed labor force, are in white-collar occupations at-risk to offshoring. While not all of these jobs will be offshored, the number of jobs is of similar order of magnitude to the manufacturing sector, and the proportions offshored could be similar as well. For metropolitan areas, the analysis shows that places with high shares of the labor force employed in at-risk white-collar occupations tend to have larger populations, a more highly educated workforce, and higher earnings. Despite these advantages, between 2001 and 2003 these places had slower employment growth, in both at-risk occupations and overall, and to some extent lower wage growth than places with fewer at-risk jobs. A more detailed look at the San Jose metropolitan area—Silicon Valley—shows that the occupation profile is changing--a possible sign of restructuring. Despite heavy jobs losses, incomes are rising in the MSA as routine jobs are lost (to offshoring and other factors), but the most advanced technical activities remain. Policy responses to white-collar offshoring at the state level have addressed the politically prominent issues rather than the major problems likely to emerge from the process. Policy responses need to focus on worker and business assistance, maintaining competitive strengths, and positioning the community, local firms, and the labor force to participate in future growth opportunities.

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