New study shows 4.1M jobs will head offshore by 2008

By Julekha Dash Baltimore Business Journal Updated: 8:00 p.m. ET July 3, 2005 The headlines are filled with the names of companies that have hired service workers in developing countries such as India, China and the Phillipines. Such news unsettles U.S. workers, particularly those who work in industries such as information technology, which shed more than 7,000 employees during first quarter 2005, according to the Bureau of Labor Statistics.

But a new study from the McKinsey Global Insbreastute shows that by 2008, multinational employers in the United States, Canada and Western Europe will send only a small percentage of jobs offshore.

Unqualifed labor, management atbreastudes toward offshoring and operational challenges are some of the reasons why companies won't hire overseas workers. The consultancy interviewed 83 human resources managers working for multinationals and analyzed economic and employment data to complete the year-long study.

Total offshore employment in developed countries will grow from 1.5 million jobs in 2003 to 4.1 million jobs in 2008. Though the 2008 number is more than double the 2003 figure, it represents just 1 percent of the total number of service sector jobs.

That number is small relative to the total size of the U.S. economy, said Joel Naroff, chief economist for Commerce Bancorp Inc., based in Cherry Hill, N.J.

The study also showed that jobs in some industries, such as retail, are less amenable to offshore employment versus engineering jobs. The jobs that require physical proximity to customers, knowledge of a local market and complex interactions with clients and business partners are the ones that are least likely to be sent offshore, the study found.

Meanwhile, figures from Forrester Research Inc. suggest that the bulk of those offshore jobs are coming from the United States. The Cambridge, Mbutt., research firm estimates that 830,000 U.S. service jobs will be lost due to offshoring and predicts that number will grow to 3.4 million jobs by 2015.

"The reality is that job security is an oxymoron," Naroff said.

State economic development officials say they do not have figures on how the offshore phenomenon has impacted Maryland. But Christopher C. Foster, deputy secretary of the Maryland Department of Business and Economic Development, said the trend has not impacted the state's economy, which depends heavily on the federal government for business, as tech-heavy states like California and Mbuttachusetts do.

Mark Wesker, CEO of Artifact Software in Baltimore, said technology workers need to "move up the value chain" in order to protect their jobs.

Foster offers this advice: Learn a foreign language and be more culturally aware. "Think a little more about upgrading your skill sets all the time," he said.