Outsourcing Skilled Work
An article on outsourcing from The Times stated:
Up to 15,000 well-paid City jobs could be lost to India over the next five years, according to research that gives warning of a willingness by firms to outsource complex roles to low-cost economies. The displacement of between 10,000 and 15,000 financial services jobs by the end of the decade would add to the flood of low-skill call centre and back office administration jobs that have already been shifted abroad.
If all the jobs eventually go to India (any low-cost economy), UK will begin to have an increased unemployment rate - this in turn will mean that there is less money in the system for financial institution to manage as more people will barely have enough to survive, talk less of investing. This is slightly extreme as most City firms will have a good spread of business around the world and may not experience this.
I think it is more interesting to think about the implication for the low-cost economy (ies). The theory of supply and demand suggests that in the long run, as the demand for skilled workers increases, their pay demands (including benefits) will also rise and after a period it is possible that this will match the expected salary level of a UK/US-based financial analyst.
The reason for this is that as all this job transfer/outsourcing occurs, these low-cost economies will develop further and government (well, politicians) will try to gain supporters by offering incentives such introducing increased pension benefits, minimum pay, and special insurance to ensure healthcare is available etc. This will be achieved through taxes or passing a bill enforcing certain employment laws.
I can go a step further and say “the company will move such jobs to other low-cost economies when the associated cost saving disappears” - I am not sure this will be economical. Is outsourcing here to stay?
Tags: GeneralIn the past: Love Actually, Purpose Driven Life - Intro
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