Saying that the world is on the cusp of the next Industrial Revolution is a grand claim. After all, there have been only two such revolutions before in history, and both resulted in momentous changes in the way people live and work.
So, when an economist of Alan S. Blinder’s stature says that we’ve moved into the Third Industrial Revolution, it makes sense to listen. A professor at Princeton University and a former vice chairman of the board of governors of the Federal Reserve, he argues that this Third Industrial Revolution has been ignited by the offshoring phenomenon.
“The kinds of jobs that can be moved offshore will not disappear entirely from the United States or other rich countries, but their shares of the workforce will shrink dramatically,” he writes in Foreign Affairs
. “And this reduction will transform societies in many ways, most of them hard to foresee, as workers in rich countries find other things to do.”
Blinder believes that a lot more jobs are in danger of being offshored than is commonly thought. He points to studies estimating about 11 percent of U.S. jobs could be offshored but thinks those researchers are looking at only the most obvious offshoring candidates. Lots more will emerge. In essence, any kind of service work that can be delivered electronically is subject to offshoring. This opens up a huge number of jobs—including many professional jobs—to this world-changing dynamic (Crook, 2006).
In the future, Blinder argues, the big distinction in the labor force will not be between workers with and without skills. It will be between “those types of work that are easily deliverable through a wire (or via wireless connections) with little or no diminution in quality and those that are not.” There are lots of professional jobs that won’t be safe from offshoring (e.g., security analyst, accountant, programmer) but some that might be (e.g., physician or elementary school teacher). It all may come down to whether or not services need to be personally delivered.
Of course, even that neat distinction will shift over time since more personal services could become less personal over time. University lectures, for example, could be more frequently recorded and distributed over the Internet, making expensive real-time lectures a luxury rather than a necessity.
These trends will bring major changes to the way nations look at jobs and educate their workforces. For one thing, a lot more people will move into jobs in which they can provide personal services. “Thus,” writes Blinder, “the U.S. workforce of the future will likely have more divorce lawyers and fewer attorneys who write routine contracts, more internists and fewer radiologists, more salespeople and fewer typists.”
Education may change to accommodate the need for more personal services. There might be a renewed emphasis on social graces and human interaction skills, and an increased demand for training for jobs in personal services is likely.
One of the problems that Blinder highlights is that the productivity of personal service jobs is not easily raised, an economic dynamic referred to as “Baumol’s disease.” Since more people will be chasing personal service jobs in the future, this could wind up being a major socioeconomic headache. The expense associated with such work could rise, but real wages for such work (except for luxury personal services) could drop as more people enter these fields. In short, there’s likely to be a lot of social turbulence as people scramble to adjust to new realities.
But we shouldn’t assume that Blinder is correct on all scores. After all, some economists believe that Baumol’s disease isn’t as intractable as once thought. By using new technologies in innovative ways, companies have already made strides in boosting the productivity of everyone from bank tellers to package deliverers. Personal services are a harder nut to crack but probably not impossible.
Blinder doesn’t touch on the subject of robotics, for example. Robots that vacuum and wash floors are already in the marketplace. In the future, people who provide personal services such as housecleaning may leverage automated or semiautomated tools to raise their productivity. In fact, we can envision a range of personal service employees orchestrating all manner of “bots”—from software agents to health monitors to food carriers—to help them do their jobs.
Blinder also doesn’t seem to seriously take into account the fact that the most dramatic cost advantages of offshoring are likely to be temporary. At the end of 2005, BusinessWeek
reported that India was already suffering talent shortages in its technology and outsourcing industries, that attrition rates were up to 25 percent annually, and that pay for qualified managers in technology companies had jumped up by as much as 30 percent.
Moreover, as the Indian and Chinese middle classes grow, it will mean burgeoning markets for workers and employers alike. Assuming U.S. productivity continues to rise, the global economic playing field might become level more quickly than some believe. If so, then U.S. workers will still face hypercompetition for jobs, but a growing share of the electronic flood of service work might just flow from the Americas to Asia.
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Documents used in the preparation of this TrendWatcher include the following:
Blinder, Alan S. "Offshoring: The Next Industrial Revolution?" Foreign Affairs. ProQuest. March/April 2006.
Crook, Clive. "A Third Industrial Revolution." National Journal. ProQuest. March 11, 2006.
"India: Desperately Seeking Talent." BusinessWeekOnline, November 7, 2005.