Trump and Clinton want to bring back millions of outsourced jobs – here’s why they can’t

By Stephan Manning and Marcus M. Larsen.

One of the big themes in the current presidential race is how decades of free trade have dealt a heavy blow to the American worker as millions of jobs were shipped overseas to take advantage of cheap labor.

That’s even turned some pro free-trade Republicans into protectionists. As a result, the candidates are promising to bring these jobs back to the U.S. – whether by lowering taxes (Donald Trump), improving skills (Hillary Clinton) or building infrastructure (Bernie Sanders).

But can all these manufacturing, service and knowledge-intensive jobs that were outsourced or offshored to China, India and other places really be “brought back,” as the candidates seem to believe?

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Will U.S. Tech Jobs Turn All-Indian? The H1B Visa Dilemma

By Stephan Manning.

Skilled immigration is one of the most controversial topics in the current presidential election race as political scientist Ron Hira points out in his latest Conversation article. At the core of this debate are H1B visas which allow U.S. employers to sponsor the temporary recruitment of skilled workers from abroad, particularly in so-called STEM* professions. Currently, U.S. law permits 85,000 H1B visas to be issued every year. In theory, this visa program allows for labor market flexibility in response to domestic skill shortages. In practice, H1B visas have increasingly been used to employ skilled foreign workers for lower costs, primarily from India. While H1B visas have certainly helped create tech positions at home rather than offshore, Thousands of U.S. employees have been replaced in the process and forced to train those taking their jobs. Facing this dilemma, presidential candidates across the political spectrum have struggled to find convincing solutions. I discuss what’s behind the dilemma; why the solutions of presidential candidates fall short in addressing it; and what is needed to make the H1B debate more fruitful in today’s global competitive environment.

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Deskilling 4.0? How Office Jobs Look Like in 2020

By Stephan Manning.

Not long ago, many in the U.S. and Western Europe feared the loss of white-collar jobs through offshoring and outsourcing. Now, experts predict the replacement of office jobs worldwide through smart technology. According to a study by World Economic Forum (WEF), which was prepared for the annual meeting in Davos last weekend, around five Million office jobs across major economies will be made redundant by 2020 through advanced technology. For the same reason, new tech start-ups will require less and less staff, according to WEF founder Klaus Schwab. Some call it the Fourth Industrial Revolution – the fusion of technologies, and use of artificial intelligence to process the internet and big data. To illustrate, twenty years ago, preparing for legal cases would require law firms to process masses of legal documents by their own staff. Ten years ago, some of that work would have been gradually outsourced to legal process outsourcing firms in India and other developing countries employing lower-cost skilled labor. Now, legal documents are increasingly analyzed by data processing software semi-automatically. Are we seeing a new wave of ‘deskilling’ – the devaluation of human labor through technology? While many jobs might be replaced entirely, affecting in particular the developing world, the WEF report suggests that also two Million new jobs will be created, especially for high-skilled software engineers. But that may not be the whole story. I discuss another type of ‘job’ that is likely to emerge – the semi-skilled ad-hoc office worker who cleans up the mess smart robots leave behind.

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The Offshoring Paradox: Are Firms Unable or Unwilling to Retain Their Employees?

By Stephan Manning.

It is almost ironic. Some years ago many U.S. and European firms started offshoring IT, finance and accounting, software testing, engineering work and other services to India, China and other developing countries mainly to cut labor costs. Now, most of these firms struggle with retaining qualified workers abroad, after having cut thousands of jobs at home. According to various reports by the Offshoring Research Network, employee turnover remains one of the most persisting problems facing firms with offshore operations. Why is that? Well, many firms complain about ‘wage inflation’ in offshoring hotspots (see Plunkett 2014 report). But is that the whole story? Compared to Silicon Valley software engineers, most counterparts in Bangalore, India, still earn only 10-20% of salaries in the Bay area (see Payscale, article by Tam). So are firms unable or unwilling to retain workers offshore?

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Tech support en français s’il vous plaît!? The challenges of becoming a new global outsourcing hub

By Stephan Manning.

Outsourcing of IT, tech support and other business services has become a global trend. Watching India’s success in the outsourcing space, many developing countries now try to grow their own business service economy. Even African countries, including South Africa, Egypt, Morocco, Ghana, and Mauritius, have built up outsourcing capabilities in recent years (see recent article by Abbott). In fact, 8 out of the Top 100 outsourcing destinations worldwide, according to the latest 2013 Tholons Ranking, are located in Africa. Not surprisingly, Kenya’s government for example also lists business process outsourcing (BPO) as a major economic building block in their Vision 2030. Boasting an improved IT infrastructure, political stability and English language capabilities, Kenya is hoping to become a major BPO hub. Other countries are following suit. But what does it really take to become a global outsourcing hub? Can any country with low-cost labor, a good IT infrastructure and favorable business climate join the club? Continue reading