Jobs Migration

The Economist writes about how foreign competition now affects services as well as manufacturing:

The movement of jobs to the developing countries does not alter the overall level of employment in the advanced economies; however, the pattern of employment, to be sure, does change. In the aggregate, this is desirable, just as it is desirable that labour-saving technological progress should change the pattern of employment. (By the way, does anyone still believe that labour-saving technology destroys jobs overall?) So far as the effects on individuals are concerned, this process does have consequences that need to be examined and, in some cases, softened. Adequate private and public investment in skills and lifelong education is paramount in this new world, and is where attention should be focusing. But the image conjured up by the self-interested purveyors of alarm, of a hollowed-out America with relentlessly rising unemployment, is not just false but absurd.

The new jobs migration, while raising no new issues of principle, may indeed involve bigger political and economic strains than earlier bursts of expanding trade. Workers in manufacturing had long understood that they were exposed to the challenge of competition from overseas. Workers in services hitherto believed they were not: it is unsettling to be disabused. Also, it is true that the sheer scale of service-sector employment within an advanced economy arouses anxiety, unwarranted though it may be, about how disruptive the new forces of competition will be.

At the moment, the likely disruption to patterns of employment is surely being exaggerated. The actual and prospective migration of service-sector jobs is small, and likely to remain so, compared with the background level of job creation and destruction in an economy with as much vitality as America’s. And technological and geographical constraints will continue to keep many service-sector jobs close to the customer. In some ways, in fact, this is a pity: the greater the disruption, the greater the benefits. As competition forces some jobs in services abroad, it will call forth the creation of new jobs in services in their place. And on average they will be better, higher-paying jobs than the ones that migrate.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.