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Offshoring

August 1 2007 - A study by Katerina Rüdiger for The Work Foundation suggests that perceived threats to UK employment from offshoring to developing countries such as India have been exaggerated. The report found little direct evidence of major job migration and argues that imported services from other industrialized economies such as Germany are much more significant.

The report cites data from the European Restructuring Monitor that recorded 420 cases of restructuring during the first three months of 2007 involving 132,762 job losses and 184,511 job gains. Only 5.5 per cent of those lost were due to offshoring. UK jobs in sectors considered vulnerable to outsourcing such as call centres have increased.

Figures for 2005 indicate that India is fifteenth in the list of countries exporting services to the UK. Travel (©626 million) and transportation (©289 million) are the most valuable of these. Computer and information services (©122 million) come third, approximately 25 per cent of the value of German imports in this sector. The UK imports over sixteen times more business services from Germany than from India.

The report argues that recent debate about offshore outsourcing has become alarmist implying that top professionals across all sectors are potential victims. The report suggests that "self serving claims from consultancies and aggressive PR from outsourcing companies" has led to neglect of more considered analysis. Companies are increasingly combining business models and settings rather than focusing on offshoring to reduce labour costs. Cultural difference and proximity to key markets remain critically important factors in location decisions. The report notes that rich, industrialized economies making most use of outsourcing are also major recipients of inward schemes. Successful Indian companies are establishing in developed western countries and contributing to job creation.

Katerina Rüdiger said:

"If 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 its magical high-skill, low-wage mix. India's high tech sector is indeed booming, but is not 'coming for our lunch' as some of the more apocalyptic commentators have suggested.

"The 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 - an increase from 0.4 per cent to 1.2 per cent between 1995 and 2004 - 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."

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Offshoring Worries But Does Not Demotivate Employees

June 22 2006 - A fifth of employees in the UK worry about their jobs because of the risk of 'offshoring' to low-cost countries such as India or China, according to new research from consultants Watson Wyatt.

"Offshoring jobs can reduce costs and enhance service. But it can also unnerve and demotivate home country employees," said Jonathan Gardner, an economist at Watson Wyatt. "We wanted to know how much of a concern to employers this should be."

Watson Wyatt researched employees' feelings about job security in UK-based companies that have offshored work, compared with their counterparts in organisations that had not shifted jobs overseas. 5,000 people were sampled:

  • 37% worked for companies that offshored work for the UK market, either directly or had suppliers that had done so
  • 52% had not had this experience
  • 'Don't knows' - 11% were unable to answer

36% of those with experience of offshoring said they felt less secure in their job as a result of the trend to offshoring, compared to 11% of employees in the second group. And 17% of the first group felt that there was a large risk of their own job being offshored within the next 12 months, compared with 2% in the second group. In fact, 13% of the first group were prepared to admit that their job could be done equally as well offshore as in the UK, compared with 5% of those with no experience of offshoring.

Differences between the two groups were less pronounced when motivation was considered:

  • Around 30% of those with experience of offshoring said they were less motivated at work, compared with 19% in the group without such experiences.
  • 21% of the first group said they were less willing to take risks and share new ideas at work. This compared with 15% in the second group.
  • 58% of those with offshoring experience thought that perceived stress at work was manageable, compared with 66% of the second group.

"The impact on motivation seems to be fairly small," said Jonathan Gardner. "Perhaps most telling is the result of the question as to whether or not they were considering finding a new job in the next year."

36% of people who had already experienced offshoring said they would be looking for a new job in the next 12 months. But this was little different to the 37% of those who had not had the experience. Employees may feel less secure and a little less motivated because of offshoring but this does not increase the likelihood that they will start hunting for a new job. Watson Wyatt argue that this may be because they are working in industry sectors where competing employers are also engaged in offshoring.

"While the majority of employers may consider the short-term demotivational - and consequent productivity - impact of offshoring acceptable, they cannot afford to be complacent," said Jonathan Gardner. "It should be of great concern if otherwise committed and high performing employees for whose roles their employer has no plans to shift overseas are being demotivated by fears of offshoring."

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