LONDON, 26 November 2003 — Britain’s empire is striking back. Former colonies have found a silver lining in the bitter legacy of conquest: English, the language of former masters, is a competitive advantage in the global economy. South Africa and India are the new destinations of choice for British companies looking to cut costs. Call centers and IT processing, and even such high-skilled work as pharmaceutical research, are being “offshored”.
White-collar workers are discovering that they are as vulnerable to competition from cheaper workers abroad as steelworkers and shipbuilders a generation ago. Unions fear the service sector is about to repeat the experience of manufacturing, which has lost 3.3 million jobs since 1980.
Call centers, the white-collar factories that were going to replace lost manufacturing jobs, were among the first to move offshore. Amicus estimates that 200,000 call-center jobs will be lost by 2010. The news is even worse for financial services; Deloittes estimates that 2 million of 13 million insurance and banking jobs in the West could move to India by 2008.
Some unions accept the economic logic of companies relocating where labor is cheaper, but others want the government to take action to protect British jobs. However, any union leader expecting Labour to be more sympathetic than the Tories 20 years ago would have had a rude shock last week. “We cannot preach liberalization to the rest of the world and practice protectionism at home,” Patricia Hewitt, the trade secretary, told the CBI. “It is much easier to see the short-term benefits of protectionism than to see the long-term costs to consumers and business competitiveness.”
Outsourcing is usually presented as a win for developing economies at the expense of Britain. But Ms. Hewitt argues that, like trade, cheaper service providers abroad can help the British economy. Just as importing cheaper goods puts more money in consumers’ pockets, so does importing cheaper services.In fact, although it’s good for the Idian economy as well — these are well-paid jobs by local standards — analysis suggests that the country losing the jobs wins most of the economic benefits. Research by the consultancy firm McKinsey suggests that for every economic gain of $1.45 created by shifting $1 in US labor costs abroad, all but 30 cents is captured by the US.
But although the overall economic impact will be beneficial, the cost to individual workers is high. More jobs were created in the service sector after 1980 than were lost in manufacturing, but not all the redundant workers found jobs. In the parts of the country where job losses were concentrated, a generation of male workers took early retirement or went on benefit, with painful consequences for families and communities.
A CBI survey shows that a third of its members are already outsourcing, and the trend is likely to accelerate. Does this mean every British job is going to end up in China? Nonsense, says Janet Henry, of HSBC. Two-thirds of service-sector jobs cannot be offshored because they involve face-to-face interaction. Retailing, restaurants, hotels, personal care and services produced and consumed locally can’t be outsourced. Competition from lower-waged economies will trigger shifts in the labor market away from low-skilled service-sector jobs, but it won’t create unemployment; in fact, despite the loss of manufacturing jobs, employment in Britain today stands at a record high.
