06 Sep Gone missing: Today jobs, tomorrow workers?
Okay, whodunit fans, here’s a mystery to solve. Despite a two-year-plus economic recovery in the United States, an estimated one to five million jobs (depending on which source you cite) have mysteriously failed to appear as anticipated. What happened to them — why have they not been created as expected? The list of possible suspects includes high healthcare costs, an inconsistent economic recovery, uncertainty about the future, terrorism and the war in Iraq, and offshore outsourcing, to name a few.
Each of these trends and events has played a role in fouling the fuel mix of America’s sputtering job growth engine. But if my recent visit to a large U.S. media company is any indicator, a chunk of those missing new jobs in the IT category have been detoured to India. And many more will likely be going abroad in the future.
A media company invited me to share insights with them from my research on outsourcing. The discussion provided a glimpse into the complex impact of outsourcing on jobs. The presenter before me at the session was the head of the Indian subsidiary of a leading American-based IT and business process outsourcing provider. He told a breathtaking growth story. In a matter of a few years his operation has grown from a handful of employees doing arcane technical tasks to about 2000 people engaged in diverse IT work. He projected that his workforce would grow to ten thousand employees by 2007 – a five-fold increase. An obvious question arises – where will the work to support this astonishing growth projection come from?
The media company’s use of offshore outsourcing suggests that countries like India are taking new jobs not just existing ones. The company is experiencing solid growth and it’s IT group has more work than it can handle with existing staff. It has chosen to offload a significant chunk of work to its outsourcing partner. New jobs that might have been created internally are now being done by the outsourcing provider — some by US based staff, but the majority by its employees overseas. It calls this practice “global sourcing” and indeed it has centers not just in India but in other parts of the world such as Eastern Europe, Asia, Canada and South Africa. This is not a unique approach — all the competitors in the industry have implemented similar global service delivery models.
This example casts doubts about future job creation in the United States for many types of technology-related work. There is growing evidence however that another long predicted and potentially counter balancing trend — the exodus of the baby-boom generation from the workforce — is beginning to happen.
The lead article in the August 29, 2004, Sunday business section of the New York Times (available free until November 5) describes how this trend is playing out among organizations in Pittsburgh, Pennsylvania. The piece points out that Pittsburgh, like many other parts of America, has a high unemployment rate (5.7 percent in July, up from 4.2 percent three years ago) and is deeply worried about the sluggish pace of job creation.
But a shift in the region’s workforce demographics may be about to change the situation dramatically. The article cites data from a report produced by Duquesne University indicating that the region’s workforce is rapidly aging and that worker surpluses could soon become worker shortages. According to the report more than 16 percent of Pittsburgh’s population is above the official retirement age of 65. By 2012, southwestern Pennsylvania could face a shortage of 125,000 workers – about a tenth the size of today’s labor force.
According to the article, what is happening in Pittsburgh will likely happen across the entire nation. As workers age, fewer new bodies are coming up the pipeline to replace them. It cites projections from the Bureau of Labor Statistics, indicating the working-age population – adults 16 to 54 will have grown by six million people from 2002 to 2012. By contrast, the 55-and-over age bracket will have expanded by 18 million.
Jobs are disappearing, but soon so will workers. There are several implications of these trends for companies. Global labor sourcing via outsourcing or immigration will continue to be a prominent part of the mix. Keeping older workers in the workforce longer will be another difficult challenge. Lastly, there will likely be intensifying competition for the relatively smaller group of workers between the ages of 35 and 44 (forecasted by the BLS to shrink by 10%) with solid experience but less than peak earnings.
These are prime candidates to replace savvy baby boomers. Corporate leaders will need a deft hand to manage through these trends. They should take care to use global sourcing prudently – overdoing it could alienate key mid-career and older workers who may soon be desperately needed and drain critical knowledge from the company. Leaders should also seek to hire more U.S. workers now so that they will be ready to step into jobs vacated when the boomer exodus starts in the next couple of years.
Tony DiRomualdo is a business researcher, writer, and advisor with Next Generation Consulting. He works at the intersection of people, business strategy, and information technology to help companies create a committed and high performance workforce. Tony can be reached at email@example.com.
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.