“If you can do your job from home, be scared. Be very scared,” Richard Baldwin, an economics professor at the Graduate Institute in Geneva, Switzerland, said back in November 2021. “Because somebody in India or wherever is willing to do it for much less.”
Baldwin may have been aiming at people’s fears when he said that a year-and-a-half ago. But his predictions are catching fire among more and more bosses.
“A lightbulb went off” recently for Johnny Taylor Jr., the CEO of the Society for Human Resource Management (SHRM), as he told the Wall Street Journal in a story published this week. It came when an employee asked to relocate from Virginia, where SHRM is based, to North Carolina and pivot to remote work. In response to the employee’s request—which was hardly unusual—Taylor outsourced the job to India, which saved him 40% in labor costs.
This could happen at your company, too. Remote work is still going strong as scores of workers demand to keep their newfound flexibility and join the masses who have moved from major cities to outer suburbs—or even across the country or ocean. In deep quarantine times, bosses most often relented, allowing workers to decamp at their leisure. But that wasn’t out of the goodness of their heart; in a tight talent market, they were desperate to hang onto their workers.
The picture looks different now. Job openings in February dropped to their lowest rate since May 2021, giving the power back to bosses. And some of them are using that power to cut costs and offshore jobs where they can.
In fact, workers with jobs that have allowed a work-from-anywhere set-up might soon see a reversal of fortune.
Companies needed to pivot
The remote-work craze allowed even small, cash-strapped businesses to explore outsourcing options. The pandemic left them no choice but to digitize and learn to manage a distributed workforce. For some bosses, outsourcing work overseas is the “logical next step, especially as wages soar and workers remain scarce,” the Washington Post reported last year.
This isn’t entirely new. According to data payroll and benefits firm Gusto gave the Post, the number of contractor payments in the United States grew 56% between 2019 and 2022.
“The pandemic became a very volatile time, and lots of businesses needed to pivot on very quick timelines,” Gusto principal economic Liz Wilke said. “And they also needed skills and capabilities that they didn’t have before or could not get in the talent market. And that is the primary advantage of contractors.”
Around 15% of U.S.-based service support jobs like software developers and customer service reps could move overseas within the decade, Stanford economist and WFH Research lead Nick Bloom told the Journal. But the kinds of jobs vulnerable to offshoring could creep into countless kinds of white collar work.
A ‘seismic shift’ for white-collar workers
Many companies hadn’t yet internationally outsourced most jobs that require higher education, Anna Stansbury, an assistant professor of work and organization studies at MIT Sloan School of Management who teaches a course on the future of work, told Fortune back in September. But if those jobs can be done remotely—especially the high-paying jobs—she says outsourcing them could “pretty clearly” offer huge savings, exactly as Taylor, SHRM’s CEO, found.
The potential for change “would be seismic if all of these well-paid white collar jobs were suddenly outsourced to less rich countries,” Stansbury added. “If people that code for Google and Facebook were able to live wherever in the U.S. they wanted and [work] for a year and a half without ever going to the office, it seems very, very likely that a lot of companies will be rethinking this longer-term and outsourcing those kinds of jobs that didn’t used to be outsourced.
She points to an October 2021 National Bureau of Economic Research (NBER) paper from Baldwin, the fear monger, and his research partner, Jonathan Dingel. They categorized jobs into one of four groups: highly offshoreable, offshoreable, hard to offshore, and non-offshoreable.
To be “highly offshoreable,” a job only needs to answer “no” to two questions: “Does a person in this occupation need to be physically close to a specific US work location?” and, if not, “Must they be physically close to a work unit?” In the near-future, tasks that can be done remotely by people in those jobs “will inevitably be done by telemigrants” rather than U.S.-based workers, Baldwin and Dingel predict.
Easier said than done, of course. “Social and cultural contexts across countries [make] it less likely that a public relations specialist or a sales engineer located in Hanoi is a perfect substitute for one located in Seattle,” they added.
Plus, as Nick Bloom told the Washington Post, an average company isn’t going to open an international HQ quite yet. “You need to take a few trips there first to scope the place out,” he said. “But give it two or three years and we will be looking back at 2020 as the turning point for service-sector globalization.”