The Outsourcing Weblog

What Kind of Jobs Cannot be Outsourced?

September 8th, 2008 › Opinions & Insights › admin ›

Photo courtesy of iStockphoto, Image# 3776029

Both US Presidential campaigns have taken on the issue of outsourcing. Barack Obama is talking about restructuring incentives to encouraged companies to keep jobs on-shore and is talking about job creation in "new areas that cannot be offshored." John McCain is talking about a massive training program and some form of public assistance during the training process. But it is important to understand what type of jobs "cannot be outsourced" to determine (a) the underlying meaning of the Obama proposal, and (b) the long term value of the McCain proposal.

I can safely assert that "jobs that cannot be outsourced" are not really information-era or manufacturing jobs. Pretty much any job that is based upon data or manufacturing can easily be sent abroad. Historically, design and creative functions have been US- and European-based, but there are two problems with these areas – first, there are a limited number of these kind of jobs, and second, its only a matter of time before Indian and Chinese manufacturers develop design skills rivaling those of US and European designers.

So, taking information-era and manufacturing-type jobs out of the mix, we're left with three basic kinds of jobs: (a) infrastructure building and general construction; (b) governmental positions; and (c) a large portion (but by no means all) personal and professional services.

Under this analytical framework, the policies of the two parties diverge dramatically. The McCain policy will likely be oriented toward information-era jobs (the kind of jobs that require substantive training) – jobs that can be outsourced in the future. This could very much be a repeat of the 80s and 90s era policy push into IT education. The government and private industry set a goal, people are trained, then they get "good" jobs at good wages, and then the jobs are outsourced into lower-cost markets.

The Obama plan approaches this differently. First, but revising the tax incentive, some jobs may return or remain onshore (although exchange rates and labor costs will continue to have a more significant effect. Second, Obama wants to invest in infrastructure, a position that will not, by its nature, encourage education and retraining (although it will employ many that have been directly harmed by the housing crisis). Finally, Obama talks about creating jobs that "cannot be outsourced." But what kind of jobs cannot be outsourced (see above).

So what is the result? Certainly, the McCain approach is more favorable to corporate shareholders and offshorers for two reasons: (a) it doesn't create a disincentive to today's offshoring, and (b) it seeks to create new areas of high-wage, high-skill jobs – the jobs that our global competitors will gladly take from us.

The Obama approach is likely more favorable to the American worker. First, disincentivizing outsourcing may keep a few jobs on-shore. Second, rebuilding the infrastructure could provide lots of jobs to construction-industry workers now idled by the housing crisis. The third point, however, is questionable – as it has become abundantly clear anything that can be moved offshore will be moved. Materially changing that will require more than tax incentives.

Both positions, however, recognize the inevitability of the global economy and the need for the US to continue to be a part of it – so we're probably more talking about policy gradations than significant ultimate differences.

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