Job Prospects: Offshoring of American Jobs: What Response from U.S. Economic Policy?
Hart, David M., Issues in Science and Technology
by Jagdish Bhagwati and Alan S. Blinder, edited and with an introduction by Benjamin M. Friedman, Cambridge, MA: MIT Press, 2009, 144 pp.
In this peculiar little book, six prominent economists--the two listed authors plus four distinguished commentators, all writing separately--take stock of the possibility that expanding international trade in services, particularly service imports to the United States, will disrupt the U.S. labor market. They debate the potential scope of such trade, how fast it might grow, and who will gain and lose from it. To a lesser extent, they argue about what Americans, individually and collectively, ought to do about it.
One might think that these challenging topics would easily be enough to fill 144 pages, and indeed they certainly could have. But some of the authors also see fit to exchange insults, pursue diversions, and engage in speculation. The volume thus provides an interesting window into the internal workings of the discipline of economics as well as a few insights into its main subjects.
The centerpiece of the book is an essay by Princeton University's Alan Blinder entitled "Offshoring: Big Deal or Business as Usual?" Blinder argues that "the confluence of rapid improvements in information and communications technology coupled with the entry of giants like China and India into the global economy is creating a situation that, while not theoretically novel, may be historically unprecedented." Just as it has become possible for phone calls, medical images, insurance claims, and many other sorts of information to be conveyed thousands of miles at ever-lower costs, a huge new labor force has become available to respond to, analyze, process, and otherwise work with this information. Many occupations that were previously protected from lower-wage international competition, Blinder therefore claims, are now becoming vulnerable to it. He likens the process to "a new industrial revolution."
Blinder estimates that about a quarter of all U.S. workers currently work in occupations that are potentially "off-shorable." His method for making this estimate is primitive, and his colleagues give the method a well-justified pounding. Yet his estimate of tens of millions of jobs is consistent with more sophisticated approaches, such as that of Lori Kletzer of the University of California, Santa Cruz, who provides a brief introduction to her work in one of the commentaries in this volume. The two largest occupations on Kletzer's list, accountants and bookkeepers, employ almost 3 million Americans. Of course, not all of the jobs on the list will be taken by foreigners if the driving forces of offshoring are allowed to play out without government intervention. Employment in some occupations open to international competition will grow, because of the creativity and productivity of U.S. workers. Other occupations may be sustained in this country by lowering compensation toward overseas levels.
The authors agree on this much. They disagree about the pace of off-shoring and its impact. Blinder argues that this transformation will happen more rapidly than workers will be able to adjust to it; so fast, in fact, that we should expect offshoring to be "one of the biggest political issues in economics over the next generation." He points out that it's harder to change occupations than to change jobs and suggests that this more difficult kind of adjustment will become increasingly common in the future. In contrast, commentator Robert Lawrence of Harvard University labels Blinder "Chicken Little." "[C]hange will come slowly," Lawrence assures the reader, a view echoed by his fellow commentator, Douglas Irwin of Dartmouth University.
Lawrence claims that his position is supported by "an overwhelming amount of empirical evidence," but that is an exaggeration. International trade in services is in its infancy. Measurement of it is poor. …