Offshoring is one of the most controversial topics in the contemporary business domain. Since its emergence, the phenomenon has garnered recognition as a highly efficient and profitable way of labor redistribution. At the same time, concerns have been raised regarding the adverse impact of offshoring on the labor market, or, to be more specific, the relocation of jobs from wealthier countries to developing economies. In the absence of conclusive information on the topic, the majority of opinions on the matter remain speculative. In this light, Alan Blinder’s article “Offshoring: The Next Industrial Revolution?” remains among the more comprehensive attempts to determine its long-term effects on employment. The following paper analyzes the claim that massive offshoring is unlikely to lead to massive unemployment by elaborating on the concepts laid out in the article.
To understand the rationale behind Blinder’s claims, it is first necessary to establish the difference between personal and impersonal services. According to the definition provided by the author, impersonal services are those which can be transferred over long distances using modern means of communication without their quality being compromised (Blinder 120). Consequently, personal services are those that require personal delivery to stay valuable to the customers (Blinder 120).
Blinder argues that this distinction is the defining characteristic of the changes brought by the introduction of offshoring. Specifically, the new concept offers an alternative perspective on the job allocation and vulnerability to the competition. According to the established view, the divide is determined by the level of education and skill of the workers, implying the existence of comparative advantage for a highly educated and skilled workforce. Instead, the divide between the personal and impersonal services redefines the situation by breaking both the highly-skilled and less-skilled workers into two categories, essentially rendering the education factor irrelevant.
The described issue can be considered one of the most significant challenges facing the U.S. service industry. Another challenge is the fact that the boundary between the concepts is expected to shift steadily, with advances in communication turning many personal services into impersonal ones. However, according to the article, the service industry will not decline – instead, it is expected to be modernized. The author cites examples of two previous industrial revolutions and points to the fact that the declining proportion of employees in agriculture and manufacturing was due to the increased efficiency of operations and did not lead to the deterioration of the sector (Blinder 117). Thus, the same scenario can be expected in the case of the ongoing third revolution.
Admittedly, the argument made by the author is hard to disagree with, mostly due to the convincing similarity between the cited examples. While it is reasonable to point out that each of the revolutions was characterized by different conditions, all three are based on qualitative value-adding improvement. Also, the idea aligns well with general economic principles of mutual benefits facilitated by trade. Finally, the statistical data currently available on the topic is consistent with the suggested course of events. Therefore, it is reasonable to agree with Blinder’s statements.
It is important to understand that the practice of offshoring will likely increase in popularity and scope at least in the short term. In its current form, it offers a range of economic and social advantages beneficial for stakeholders from both groups. Therefore, it is essential to identify the most likely course of its development and capitalize on its benefits while avoiding potential challenges and, by extension, maximize the profitability of the practice.
Blinder, Alan S. “Offshoring: The Next Industrial Revolution?” Foreign Affairs, vol. 85, no. 2, 2006, pp. 113-128.