Threat to UK professional jobs from off-shoring ëexaggeratedí

The fear of large numbers of high quality jobs being outsourced to rapidly developing countries such as India is overstated, says a new report published today by The Work Foundation.

Despite the rhetoric of an abundance of Indian knowledge workers hungry for British jobs there is little direct evidence so far of significant job migration, while trade in information and communications services with developed countries such as Germany dwarfs that with India.

The report finds:

According to independent analysis just 5.5 percent of all jobs lost across Europe were due to off-shoring activities in the first quarter of 2007*. In 2005 the figure was 3.4 percent. Meanwhile jobs in sectors theoretically vulnerable to outsourcing such as call centres have gone up rather than down in the UK.

Travel (626 million) and transportation (289 million) are the largest services imported from India while computer and information services (122 million) are only the third largest import category**.

The UK imports almost four times more computer and information services and over sixteen times more business services from Germany than from India. India ranks fifteenth on the list of countries from which the UK imports services.

The paper finds that labour costs are only one factor in decisions regarding business location. Cultural contexts, in particular the advantage for producers in being located near to key target markets, remains critically important for successful organisations.

Katerina Rdiger, author of the paper ñ ëOffshoring, a threat for the UKís knowledge jobs?í ñ said: ëIf you go to an Indian business district you could be forgiven for thinking the whole world is chucking work and jobs at India because of itís magical high-skill, low-wage mix. Indiaís high tech sector is indeed booming, but is not ëcoming for our lunchí as some of the more apocalyptic commentators have suggested.

ëThe evidence suggests that while trade in services between the UK and India is certainly rising, it is not happening nearly as fast as is sometimes imagined ñ an increase from 0.4 per cent to 1.2 per cent between 1995 and 2004 ñ less of an explosion more of a slow evolution. Technology has always led to people being displaced from some lines of work into others, but what is not happening is a straightforward jobs migration from North to South, West to East.í

Over recent years, the debate about offshore outsourcing has taken on an alarmist tone amid anxiety that lawyers, medical professionals, software designers, actuaries and chartered surveyors were all potential victims of outsourcing. The report argues that self serving claims from consultancies and aggressive PR from outsourcing companies themselves has tended to drown out the careful analysis of data regarding off-shoring.

Rather than a clearly defined trend of western multinationals off-shoring to save money on labour costs, the report argues that increasingly companies are mixing business models, combining near-shoring, off-shoring and retaining operations close to home. Cultural difference remains a critical component of business models. Meanwhile, successful Indian companies are beginning to set up offices and are targeting affluent western consumers.

Countries that outsource most also tend to be the recipients of most outsourcing. The top recipients of outsourcing are rich, industrialised countries rather than poor, developing ones.