Offshoring is now affecting ‘middle class or upper middle class jobs’ in tech, accounting, and legal work
In the late 1970s, something big started to happen in the U.S.: offshoring.
Corporations all across the country began farming out manufacturing and factory work overseas, trying to take advantage of tax breaks, lower labor costs and access to cheaper materials.
More recently, this process of offshoring has combined with another big development, and that’s remote work.
Last year, around 7% of senior managers surveyed by the Atlanta Fed said they were moving more jobs abroad because of remote work – not a majority by any means, but that figure could soon be on the rise.
Konrad Putzier covers commercial property for The Wall Street Journal. He’s been following this trend and he joined Texas Standard to talk about who might be impacted most. Listen to the story above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: Historically speaking, American jobs being sent abroad is associated with things like manufacturing in call centers. But in your reporting, you talk about how this is starting to take a different sort of turn. Could you tell us a little bit more about that?
Konrad Putzier: Yeah, you mentioned call centers. So outsourcing of office jobs is not new. It’s been going on for decades. What’s new now is that more companies are outsourcing more jobs and they’re also moving more highly skilled jobs abroad. So basically jobs where you need a college degree in most cases, to get them. This could be accountants or software developers or even legal workers. During the pandemic, a lot of companies realized that, “hey, a lot of functions that we thought people needed to be with us in the office for can actually be done very well remotely.” And that led to this next realization, which was basically: “can they be done very remotely in places where we have more workers that we can hire that have lower wages and save us money, and where we don’t run into some of these labor shortages that we have in the U.S.?”
Well, one of the companies that you highlight in your reporting is a Texas-based financial firm called Q2. Can you tell us a little bit more about them?
Yeah, Q2 is an Austin-based financial services company and they’ve long had some workers working for them in India. And what happened with them is in August of 2020, during the early part of the pandemic, they had a Zoom call. And the way they described it to me is that they had this discussion where they sort of realized, “you know what, we’re now realizing that there’s all these functions that can be done remotely very well. We’re also running into the labor shortages in Austin, because it was such a hot job market at the time and still is. And why don’t we just go somewhere else and hire in Mexico?” You know, Mexico is not far from Texas. There are historical cultural ties between the places, the same time zone, which is very important. And so Q2 decided to basically add a lot of workers in Mexico as opposed to the U.S.
I know that certainly in the first wave of offshoring that we saw in the seventies, there was a lot of characterization of this being American jobs going abroad as opposed to, say, what the advantages were for the corporations. And that makes a lot of sense in terms of the policy discussion. Are we seeing that aspect of the American jobs being exported? Is that part of the conversation or the controversy right now?
That’s a part of it for sure. I think for now, it’s not a huge issue, partly because the labor market is so strong still in the United States. Unemployment is very low. And for now, in most cases, companies are hiring more abroad or basically filling newly created positions as opposed to laying people off in the U.S. But that could change. How many jobs will be lost? We don’t know. The jobs that are moving abroad more now are often middle class or upper middle class jobs – you know, people who make six figures, software developers who have college degrees – and how big of an impact that will ultimately have and how many jobs will ultimately be moved overseas will be seen. But there are some economists that actually think this is a new era and that a lot of, maybe even 10% or 20%, of all service jobs could ultimately be moved overseas.
Well, the difference is stark. In fact, I was just reading in The Wall Street Journal the other day, America is back in the factory business: record spending on manufacturing, constructing. Some people say because of concerns about supply chains from the pandemic and green energy incentives and that sort of thing. So we’re talking about different strata of labor, essentially. But that’s causing a sort of shift, if I understand things correctly.
Yeah, it’s ironic, isn’t it? You know, for decades we talked about office jobs doing pretty well relative to factory workers in the U.S. and factory jobs moving overseas. And now you can make the argument that in some cases it’s starting to reverse. And some economists think that this is a new era, that the era of factory globalization is over and that we’re now in this era of services globalization or office job globalization, and that this is really a sea change that’s starting.
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