David Smith The Sunday Times Offshoring Political myths and economic reality Offshoring’s negative politics (UK) ‘Now this is happening there won’t be any jobs left in Britain’ ‘The call-centres replaced manufacturing jobs – now even they’re going’ ‘The government must do something to prevent big firms doing this’ Offshoring’s negative politics (US) John Kerry attacks the ‘Benedict Arnold’ CEOs who have transferred jobs overseas Some US states have taken specific action to prevent public jobs being offshored Offshoring taps into the protectionist undercurrent in Washington Political reality (US and UK) UK government has taken a strong prooffshoring stance. To reject offshoring would be incompatible with free trade Stronger rise in non-farm payroll jobs starting to soften the anti-offshoring politics in America The economic reality of offshoring Is it always a ‘win-win’ game? Offshoring’s economic benefits Lower costs/lower inflation Boost to real incomes in both the transferring and receiving country Offsets labour/skill shortages Raise productivity – shift labour into higher value-added sectors …. And economic disadvantages Displaces workers, sometimes in highemployment areas Replacement jobs may be hard to find, or are lower-paid Quality of service may suffer – notably if it relies on proximity to market Why do firms offshore? What do they offshore? How much do they save? What happens to quality? What are the risks? Where does offshoring go? Telecoms capacity increasing The UK context - 12 years of economic growth Eleven years of low inflation Employment keeps on rising … particularly in services Close to full employment Healthy UK services trade Offshoring reduces labour shortages America - how many jobs? Some US evidence - GDP Lower inflation/interest rates … and a net increase in jobs US software imports from India US/Indian software jobs Conclusions Offshoring is an easy target for politicians Macroeconomic benefits are significant But there will always be individual losers