Outsource’ability

As someone who is a beneficiary of outsourcing, I have surprisingly never wondered whether there is any way to identify which jobs can or cannot be outsourced. On second thought, maybe it’s not surprising: after all, I am the guy getting a job, not the guy losing his, so why would I be thinking about it? Until a Cambodia or a Vietnam “Bangalores” us…

So it was kind of illuminating to see this analysis by a Princeton economist, Alan Blinder on the topic. Blinder points out that the trend started earlier in manufacturing, and so the manufacturing sector is now accustomed to competing with foreign labour. Unfortunately, that led to one of those “correlation is not causation” errors: many assumed that the possibility of outsourcing was based on highly educated (highly skilled) v/s less-educated (or less-skilled). This misconception is reflected in the thinking that upgrading one’s skills is the way to keep oneself employed. Blinder believes instead that the litmus test for outsource’ability is:

“…types of work that are easily deliverable through wire (or via wireless connections) with little or no diminution in quality and those that are not.”

MIT economist Frank Levy has a different litmus test for outsource’ability:

“...whether the service is itself rules-based or not.”

Levy points out that any rules-based job is subject to attack on two fronts:

-         It can be done elsewhere in the world, and

-         Software can be written to do it instead.

To which I would add another factor that becomes more and more significant as the West becomes older, its pension and healthcare costs continue to rise, and the fraction of its (younger) population who can afford to spend on the best product or service declines: suddenly, “good enough” at a lower cost will trump great at a higher cost.

Is “good enough” acceptable?  I feel that too is going to be a very important question in deciding which jobs get outsourced in the future.