The March-April issue of Foreign Affairs contained an article by Alan Blinder on “Offshoring: the Next Industrial Revolution?” He begins the article by discussing the kerfluffle over Greg Mankiw’s 2004 remarks about offshoring. Mankiw essentially reasserted the standard economic thinking that the offshoring is a good thing because it means that more things are tradable now than in the past. It’s the standard comparative advantage argument, if a country can produce something cheaper than another country then it is only natural for the market to shift to the cheaper country.
Blinder doesn’t disagree with this analysis but he does add a crucial point to the whole discussion: we have no knowledge about the size or types of changes that will occur in the economy as a result of offshoring. And the dividing line between jobs that are offshored and those that are not may not fall along the lines of high-skill, high-education versus low-skill, low-education that so many seem to expect. Globalization will push any service that can be delivered electronically to the cheapest bidder, and that supplier probably won’t be the United States or any other developed country.
Many people blithely assume that the critical labor-market distinction is, and will remain, between highly educated (or highly skilled) people and less-educated (or less-skilled) people – doctors versus call-center operators, for example. The supposed remedy for the rich countries, accordingly, is more education and a general “upskilling” of the work force. But this view may be mistaken. Other things being equal, education and skills are, of course, good things; education yields higher returns in the advanced societies, and more schooling probably makes workers more flexible and more adaptable to change. But the problem with relying on education as the remedy for potential job losses is that “other things” are not remotely close to equal. The critical divide in the future may instead 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. And this unconventional divide dose not correspond well to traditional distinctions between jobs that require high levels of education and those that do not.
Also there is a post at Max Sawicky’s blog about the fallacy of the ‘just get more education’ mantra. The post is by Jared Bernstein, author of All Together Now: Commonsense for a Fair Economy. The thesis of the book is the battle between YOYO ‘your on your own’ and WITT ‘we’re in this together’ economics. Here’s a quote:
“In mid-2005…all the national polls began to reflect considerable dissatisfaction with the economy. The president and his economic team were forced to take notice and had a highly publicized summer meeting at his Crawford, Texas, ranch. When Treasury Secretary John Snow was asked to comment on the discrepancy between how the economy was growing overall and how people were faring, he declared that it ”points you in the direction of greater emphasis on education.“ His undersecretary, Randal K. Quarles, amplified the point: ”If the country as a whole is going to undergo economic growth, then the population has to be able to take advantage of opportunities.“
In other words, it’s not our fault, it’s your fault. The opportunities are there, but you’re not skilled enough to take advantage of them. Never mind that the evidence pointed in exactly the other direction. By mid-2005 the only groups to see fairly strong and consistent job growth were those with lower levels of education. The employment rate, or the share of a given population at work—a proxy for the extent of a group’s job opportunities—was up for high school dropouts and down for college graduates. (The reason had much to do with the boom in construction and health services, and the bust in information technology.)
But such facts were not admitted to challenge the hyper-individualistic YOYO analysis, which by definition ignores the possibility of a structural imbalance in the way economic growth is distributed. As is so often the case, the only solution—”Get more education“—handed the problem back to the victim”
Business Week has posted a story about the winners of the 2006 Industrial Design Excellence Awards. In 2005 8 percent of the winners were from Asia, this year that’s up to 25%. Industrial design is one of the high-education, high-skill jobs that Blinder is talking about; it depends upon the types of education and skills that politicians keep telling us to get better at. But there is no guarantee that America will continue to be the education leader in the future.
In fact it’s not even likely. Amit Paley wrote an article in the Washington Post last month about the increase in the number of cheap overseas tutors for American students. As someone who plans to make a living as an educator, in some form or another, this story hits close to home. Education will probably be outsourced just as fast, maybe even faster, as any other intellectual job.
On the one hand I applaud the spread of education to the rest of the world. On the other hand I’m afraid that America is unprepared to compete in education. Teachers are already compensated less than they are worth, and certainly too little to incent the most qualified to enter the teaching field.
It’s like a free market perfect storm. Because America doesn’t value education we look for the quickest and cheapest substitute for teaching, foreign tutors. The teaching profession is debased further and unable to attract high quality talent. Then we tell people who are losing their job that the way to cope with the problem is to retrain themselves and get some more education. But we’ve already sold our educational infrastructure to the cheapest bidder. And, to add insult to injury, jobs that require high education aren’t being created as fast as jobs that require little education. Does anyone not think that this vicious circle is just plain stupid? Will anyone do anything to get us out of it?