Social Econ Blog

In his new piece in Foreign Affairs, "Fear of offshoring," Princeton economist Alan Blinder says really smart things. In this piece, Blinder outlines, for a general audience, the basic economics of off-shoring. He tries to address people's fears of offshoring by discussing how economies (and individuals) adjusted to the First Industrial Revolution (the movement from the farm to factory) and the Second Industrial Revolution (the movement from factory to services) before discussing the coming Third Industrial Revolution (the information age). This is an excellent piece, and there was something "excerpt worthy" on nearly every page, but I will try and focus on the stuff which is likely most relevant to this class.

The big change Blinder discusses that is likely to accompany the Third Industrial Revolution is that more workers in the service sector are likely to face competition from abroad. Specifically, we should probably start to think of service jobs in terms of those which require face-to-face interactions (personal services) and those which don't (impersonal services). Anything which can be efficiently transmitted electronically will now face more competition. These jobs, however, don't break down neatly into educated and non-educated (they way we now tend to think of "good" and "bad" jobs). As Blinder states:

It seems to me unlikely that the services of either taxi drivers or airline pilots will ever be delivered electronically over long distance. The first is a “bad job” with negligible educational requirements; the second is quite the reverse. On the other hand, typing services (a low-skill job) and security analysis (a high-skill job) are already being delivered electronically from India--albeit on a small scale so far. I could go on and on. Most physicians need not fear that their jobs will be moved offshore, but radiologists are beginning to see this happening already. The work of policemen will not be replaced by electronic delivery, but the work of some security guards will be. (My home burglar alarm is monitored from somewhere in Indiana. Why not from somewhere in India?) Janitors and crane operators are probably immune to foreign competition; accountants and computer programmers are not.

(And to further show how far this can go, some McDonald's now operate their drive thru windows from call centers). For those worrying about your career path, Blinder goes on speculates on how much technology is likely to affect different types of service industries.

Ultimately, after discussing how big these changes are likely to be, Blinder discusses how to adapt to the changes. Education obviously plays a role, but not in the way we typically think -- people skills become more important when the jobs protected from foreign competition (an thus likely to earn higher wages) are concentrated in personal services. He states:

As I indicated earlier, simply providing more education is probably a good thing on balance, especially if a more educated labor force is a more flexible labor force that can cope more readily with non-routine tasks and occupational change. Frank Levy and Richard Murnane have noted that, in the computer age, “the ability to apply well understood routines to solve problems is not as valued as it used to be.” But they believe that “rapid job change raises the value of verbal and quantitative literacy,” and so they prescribe more education. But education is far from a panacea, and the examples given earlier show that the rich countries will be able to retain many jobs that require little education. In the future, how we educate our children may prove to be more important than how much we educate them, as Simon’s words suggest. But educational specialists have not even begun to think about this problem. They ought to start--right now.

Perhaps, contrary to what we have come to believe in recent years, people skills will become more valuable than computer skills. The geeks may not inherit the earth after all, at least not the highly-paid geeks in the rich countries. (Geeks in poor countries should be in great demand.) Certainly, creativity will be prized. Thomas Friedman has rightly emphasized the desirability of steering our youth away from tasks that are routine or routinizable into work that requires real magination. In his colorful words (Friedman (2005), p. 239):

"You want constantly to acquire new skills, knowledge, and expertise that enable you constantly to be able to create value—something more than vanilla ice cream. You want to learn how to make the latest chocolate sauce, the whipped cream, or the cherries on top, or deliver it as a belly dancer—in whatever your field of endeavor."

I agree, but there are two big problems. First, creativity and imagination are notoriously difficult to teach in schools—although, in this respect, the United States seems to do have a leg up on, say, Germany or Japan. Second, it is hard (for me at least) to imagine that truly creative jobs will ever constitute anything close to the majority of employment. Never in the history of humankind have belly dancers outnumbered drones. What will everyone else do?

Blinder goes on to discuss other ways to cope with changes. It is all very good. If you are at all interested in this stuff, I recommend checking it out.