Which American jobs are in jeopardy of being shipped offshore? Sure, barbers are safe. But lots of others -- radiologists, accountants, and architects among them -- are discovering to their great unease that overseas residents can do what they do for American customers.
Economists J. Bradford Jensen and Lori Kletzer have come up with an inventive way of figuring out whose jobs are vulnerable and whose aren't.
BUNCH FACTOR. The two hold positions at the Institute for International Economics, a Washington, D.C., think tank, and Kletzer is also on the faculty of the University of California at Santa Cruz. Their paper, "Tradable Services: Understanding the Scope and Impact of Services Offshoring" is available on the Web.
Jensen and Kletzer came up with a simple test: If a worker has to be located close to the customer, then the job can't be sent offshore. If the worker can be located far from the customer, the job might qualify for offshoring. After all, they reason, if you can serve a customer in Alabama from New York, you can probably serve her almost as easily from Shanghai or Mumbai.
Next, they assume that customers for most kinds of businesses are spread uniformly across the U.S. If the people serving them are spaced just as thinly and evenly (as, say, barbers and mechanics are), then the work likely requires geographic proximity to the customer. But employees of other businesses are highly bunched -- auto workers in Detroit, stock traders in New York City, moviemakers in Los Angeles. Those people clearly can get their jobs done from afar.
Jensen and Kletzer classify every worker two ways: by occupation and by industry. For example, an in-house counsel for GM (GM) would fall into the "lawyer" and "auto industry" categories. Want to determine your job and industry's vulnerability? The following table demonstrates how Jensen and Kletzer categorize the U.S. workforce.
Here's what Jensen told BusinessWeek Economics Editor Peter Coy in an interview about his work with Kletzer:
Q: What gave you the idea of looking for geographic clusters of workers?
A: We used this geographical approach, because doing research on this is hampered by the lack of good detailed data from government sources on what is actually being traded.
Q: Where did you tend to find lots of clusters -- indicating that the jobs are potentially offshorable?
A: In professional and business services, 70% of employment is in the tradable range. It's very concentrated. The most concentrated are software publishing, sound recordings, motion pictures, securities, commodities, funds, and trusts. Most of retail is not traded. Health and education are almost all nontraded.
Q: Everybody knew that factory workers were vulnerable to offshoring, but people might be surprised by your numbers on service businesses.
A: I've heard other economists assert that we don't have to worry about services, because they're mostly nontradable. In fact, many service jobs are tradable. About 14% of the civilian labor force is employed in tradable professional services. That's bigger than the 12% that's in tradable manufacturing jobs.
Q: Does this mean that, just because employment in certain occupations and industries is clustered, that it's likely to go offshore?
A: Not necessarily. [Jensen says Silicon Valley, Wall Street, and Hollywood have built up powerful local networks that would be hard for foreign competition to dislodge.] That said, if you're in an industry that was previously sheltered, and if it's not particularly well aligned with U.S. comparative advantage, bad things can happen.