Globalization skeptics have long complained about the alleged out-sourcing of good, high-paying American jobs. But even globo-optimists, like Tom Friedman, have conceded that U.S. jobs are vulnerable with the rise of a flat world. In a 2006 essay in Foreign Affairs, Princeton economist and Obama adviser Alan Blinder argued that globalization would likely bring about a mass off-shoring of American jobs. Blinder later used Bureau of Labor Statistics data to estimate that some 30 to 40 million U.S. jobs, 22 to 29 percent of all, including significant numbers of jobs in knowledge work and high end services were “potentially off-shoreable.”
International economist Richard Baldwin takes a close look at the actual figures and finds a very different trend. Examining IMF data on the dollar volume of trade in services originally compiled by economists, Mary Amiti and Shang-Jin Wei, Baldwin plots the dollar volume of out-sourced U.S. service work against the dollar-volume of service work that has been attracted to or in-sourced by the United States.
As the chart shows, the U.S. is a net in-sourcer of service jobs, with the U.S. in-sourcing gap actually increasing over time. Based on this, Baldwin concludes that:
The US, as it turns out, is a net “insourcer.” That is, the world sends more service sector jobs to the US than the US sends to the world, where the jobs under discussion involve trade in services of computing (which includes computer software designs) and other business services (which include accounting and other back-office operations. … Blinder is right in that the US importing an ever-growing range of commercial services – or as he would say, the third industrial revolution has resulted in the offshoring of ever more service sector jobs. However, the US is also “insourcing” an ever-growing number of service sector jobs via its growing service exports. The startling fact is that not only is the trade not a one-way ticket to job destruction, the US is actually running a surplus.
The data only cover the period 1980 to 2003, so it is certainly possible that the trend-line has changed since then, but Baldwin argues that the logic of trade in services suggests this basic trend will continue.
Since services are highly differentiated products, and indivisibilities limit head-to-head competition, my guess is that we shall see a continuation of the trends in the chart. Lots more service jobs “offshored” and lots more “onshored”. What governments should be doing is helping their service exporters to compete, not wringing their hands about one-way competition from low-wage nations.
June 17th, 2009 at 1:51 pm
The Blinder/Baldwin argument here is talking apples and oranges. Blinder was looking at those professional service jobs which could be subject to international wage pressure because they could be located anywhere. Baldwin is looking at trade in professional services (i.e. revenues). It is true that our business services trade is in surplus – and has been for some time. Export has been growing slightly faster than imports. But that does not mean that business and professional services are not subject to low wage competition. They are – and it will eventually affect both our ability to export as well as the size of our imports.
By the way, it doesn’t take IMF data to see what I happening in business services trade. BEA publishes it monthly in the services under the category of “other private services.” Cover in that category are “education services; financial services (includes commissions and other transactions fees associated with the purchase and sale of securities and noninterest income of banks, and excludes investment income); insurance services; telecommunications services (includes transmission services and value-added services); and business, professional, and technical services. Included in the last group are advertising services; computer and data processing services; database and other information services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; industrial engineering services; installation, maintenance, and repair of equipment; and other services, including medical services and film and tape rentals.” (from BEA)
I use that data to publish the monthly trade in intangibles on my blog http://www.intangibleeconomy.org