June, 2009

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Why the Private Sector Must Develop a Socially Responsive Workforce Globalization Policy

Tuesday, June 30th, 2009

The U.S. in general, and U.S. businesses in particular, are understandably preoccupied with the need to reinvigorate business and get American workers back to work. While a lot of attention has been focused on ensuring that the jobs created by government stimulus dollars create jobs in America, rather than in other countries, a lot less thought has been given to another fundamental question:

How many of those jobs that are created in the U.S. will be sustainable, and how many will migrate offshore—pushing newly employed workers back onto the unemployment lines?

Businesses are increasingly caught between the proverbial rock and hard place. On one hand, these companies must continue to grow their businesses and maintain profitability. On the other hand, they desperately want to maintain loyalty to their employees and their communities. These companies are increasingly being forced to look to offshore or foreign-based employees as a means of:

  • Gaining access to the best people—especially technical people—at a time when fewer U.S.-born students are studying science, engineering, math and IT (SEMIT) and the supply of offshore and other foreign-born graduates is exploding;
  • Protecting themselves from lower-cost competitors who already rely on offshore employees; and
  • Building emerging country presences to capitalize on markets that are expected to grow at 2-3 times the rate of the U.S. and other developed country markets.

The country is reluctantly coming to grips with the fact that the majority of blue-collar manufacturing jobs will inevitably move offshore. We have spent the last five decades helping our children prepare for the jobs of the future—a.k.a. knowledge jobs—and retraining displaced blue collar workers for these jobs. Indeed, 75% of U.S. jobs are now in services and more than 60% of these consist of some form of knowledge jobs.

But what happens when these knowledge jobs go offshore? Services offshoring has moved far beyond call centers and IT application maintenance. Accounting, financial analysis, market research, medical diagnostics, legal research and medical diagnostics jobs are all going offshore. So too is cardiac surgery and R&D—the “seed corn” for business growth. China, in fact, is now the most popular location in the world for establishing new R&D hubs and India is the third most popular (after the U.S.). Where will the next secure, high-value U.S. careers come from? What do we train our children for?

Although no one yet knows the answers to these or dozens of other key questions, that has not delayed calls for urgent action. These include proposals and laws that will:

  • Slash the number of H-IB visas;
  • Make it more difficult for foreign students to enter and remain in the U.S.;
  • Forbid companies working on government contracts or receiving government funds to hire non-U.S. citizens; and
  • Tax unrepatriated foreign income.

And all this is before the issue surrounding the offshoring of knowledge jobs has even become a public hot button. What will happen when the public really understands the implications of living in a global knowledge economy? The jobs that will be lost and never created? The compression of U.S. salaries? The confusion surrounding (if not the actual loss of) career options for students and employees?

The reaction will almost certainly surpass that to the globalization of manufacturing jobs. And while the intensity may not reach the level surrounding financial service bonuses, it will last much longer. After all, society and parents have been preparing children for the decline of the manufacturing industry for years by pushing them to prepare for a secure, well-paying knowledge job by going to college. What will happen when large numbers of the highest-end knowledge jobs begin to disappear—and nobody has a clear vision as to the types of jobs that will replace them?

Companies and executives that offshore such jobs will be vilified. Political remedies will almost certainly be draconian.

What’s the private sector to do? Although it will be tough for business to portray the globalization of knowledge work as a positive for American workers, it cannot afford to hunker down with the hope that the PR/political storm will never materialize, or to ride it out.

However, the private sector does have the potential of partially defusing the GKE time bomb—and simultaneously helping to educate and enlist the support of some powerful government allies. How? My next post will provide a playbook describing some of the primary actions the private sector can take to protecting its employees and communities, while simultaneously protecting its customers and shareholders.

For much more on this topic, see my report Why the Private Sector Must Develop a Socially Responsive Workforce Globalization Policy.

Posted in 21st Century Careers, Business Trends, Corporate Social Responsibility, Creating the 21st Century Workforce, Economic and Political Forces, Global Forces-General, Globalization, Immigration and Offshoring, IT Industry and Companies, IT Industry Role in Education, IT Industry Trends, Job and Career Opportunities, Skills Requirements, STEM Careers, Technology's Impact on Job Skills, Workforce Trends | No Responses »
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Welcome to the Global Knowledge Economy

Monday, June 15th, 2009

We live and work in a global economy. In most cases, the signs of a global workforce are so integrated in our day-to-day lives that we don’t even notice them, such as when we buy products that have been made overseas (whether from Wal-Mart or Gucci), or when we sign a tax return that was actually prepared by an accountant in India. Increasingly, however, the signs of a global workforce become so apparent that they force their way into our consciousness, such as when we struggle to understand an Indian customer service rep or when jobs in our community fall victim to Chinese manufacturers. Occasionally, global workforce practices become high political drama, as around immigration laws, NAFTA, U.S-Chinese economic relations and the staging of protests and riots around international trade and economic summits.

The Globalization of Knowledge Services

But for all the attention, one rapidly growing and ultimately much more critical aspect of workforce globalization has largely escaped broad public attention—the globalization of knowledge jobs. Although most U.S. IT workers have seen how Indian IT jobs are migrating steadily up the value chain (from basic application testing to complex development and even application architecture), this is only the first and most advanced of offshore entries into high-value, knowledge-based services. Consider, for example, that:

  • China (followed by the U.S.) and India are now the most popular locations for multinational corporations to establish research and development laboratories, with China alone housing more than 700 such facilities;
  • “Medical tourist” hospitals in countries such as Thailand and Indian boast world-class surgeons already operate on close to 1 million American patients per year. Some U.S. insurance companies not only cover such procedures, they now offer financial incentives for patients to use these hospitals; and
  • India graduates about 10,000 Chartered Financial Analysts (CFAs) per year, more than any country other than the U.S.—and this is despite the fact that the cost of obtaining the certification is almost as high as likely first year salaries.

The list goes on and on. Accounting, financial analysis, architectural, market analysis and legal research jobs, once the exclusive province of developed country professionals, have all begun to move to offshore providers. And as shown in the figure below, emerging country knowledge jobs are pushing rapidly up the value chain, from those that require relatively rote process-based skills, to analytical, conceptual and, increasingly, to high-level innovative tasks.

The Global Knowledge Services Continuum

Portent or ParanoiaGiven the relative lack of public attention to this phenomenon, one may be tempted to dismiss the examples as isolated incidents. Tempting, but not likely. Consider, for example, the findings of two separate studies, a 2007 study by Princeton Economics Professor Alan Blinder and a 2008 project by the Harvard Business School. Each concluded, using very different methodologies, that a minimum of 21%—and up to a potential of 42%—of U.S. jobs have the potential of being “offshoreable.” (Not that they actually will be offshored, mind you, but that they have the potential.)

As scary as the numbers may be, the trends behind the numbers provide even greater pause. While manufacturing jobs used to face the greatest threat of being offshored, knowledge jobs—those that generally require college degrees and that pay moderate to high wages—are now the most vulnerable to offshoring.

So what can a country—much less a company or an individual—do?

  • Fight the trend by prohibiting it, imposing punitive penalties or by publicly pillorying companies and executives that engage in offshoring? Yet this can ignite a firestorm of inflationary price increases, invite the enmity of countries that have already bought into U.S. championed vision of free and open trade, reduce the competiveness of U.S. corporations and chase many of our most successful businesses to reincorporate in other countries.
  • Ignore it and hope that it will go away—or wait until the problem becomes so acute that we are forced into immediate reaction? This is certainly a time-honored approach to difficult problems. And it may work, at least if we are willing to sit and watch as millions of previously secure jobs disappear, and families and communities are disrupted. Then, we will need to wait for the market to eventually come up with its own solutions, for our educational institutions to adjust and for society and governments to foot the bill.

Surely, there’s a better way. What do you think?

Posted in 21st Century Careers, Business Trends, Creating the 21st Century Workforce, Economic and Political Forces, Economic Forces, Global Forces-General, Globalization, Immigration and Offshoring, Innovation/Entrepeneur, Job and Career Opportunities, Political Forces, Skills Requirements, Societal Forces, STEM Careers, Technology's Impact on Job Skills, Workforce Trends | No Responses »
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Defining the Post-Recession Knowledge Workforce

Wednesday, June 10th, 2009

The composition of the knowledge workforce was in flux before the current recession. Many of the knowledge workers were Baby Boomers—who were preparing to retire. With insufficient numbers of Gen Y’ers to fill their shoes, many of these jobs were destined to be unfilled. To compound the issue, a growing percentage of young adults—especially men—were shunning the college education needed for much knowledge work. For some Gen Y’ers, not going to college was a matter of choice. For others it was an economic mandate as the cost of higher education became more and more difficult for many middle-class families to afford. And for those who do go to college, the percentage of U.S. students who study technical fields including science, engineering, mathematics and IT (SEMIT) continues to decline.

The good news is that foreign nationals are increasingly filling this breach. For example, while foreign-born people represent for only 13% of the U.S. population, according to an April 12, 2009 article in The New York Times, they accounted for 24% of the nation’s scientists and engineers as of 2007. Foreign nationals are particularly well represented at the highest levels of their professions, accounting for 42% of all current U.S. master- level engineers and 60% of PhD-level engineers (and a similar percentage of U.S. university SEMIT masters and PhD candidates as well as 28% of U.S. physicians, and 26% of all U.S. Nobel prize winners). According to a 2007 UC Berkeley report, “America’s New Immigrant Entrepreneurs” (America’s New Immigrant Entrepreneurs) foreign nationals are among the founders of one out of every four U.S.-based technology startups).

The bad news is that America, in its infinite wisdom, is trying to reverse the slide in domestic SEMIT enrollment not by aggressively encouraging and preparing U.S. citizens to study these fields, but by making it increasingly difficult and less attractive for foreign nationals to come to or to remain in the United States

Although the recession will certainly not change everything, it will change a lot. Think the Baby Boomers will retire soon? It is hard to believe recent surveys that suggest that most still plan to do so. After all, the majority were ill prepared to fund retirements even before the recession decimated the values of their small nest eggs and their homes (at least the percentage of their home values that were not encumbered by second mortgages).

And then there are the Gen Y’ers who are finding few jobs. New graduates who are all but locked out of the formal job market are either:

  • Returning to school (which is good for the future of the economy;
  • Being forced to take jobs that are either below their skill levels or, often, totally outside their chosen field (which is bad for the future); or are
  • Temporarily dropping out of the workforce altogether (even worse for the future).

The composition of the post-recessionary workforce is further clouded by a number of anomalies that are either unlike previous recessions, or of a much different magnitude. Examples include:

  • White collar unemployment has dramatically grown (driven partially by the financial services industry meltdown), in addition to the traditional decline in manufacturing jobs;
  • The collapse of the financial services industry will certainly force students and recent graduates to reassess career choices and may prompt them to look to new areas of study (hopefully SEMIT) and industries (such as new-generation manufacturing sectors);
  • Many of the manufacturing jobs that are being lost in this recession will not come back to the United States. Meanwhile, many of the entry level knowledge jobs for which these displaced people can be most easily retrained, are increasingly susceptible to being offshored. The prospects for highly touted green collar jobs remain uncertain;
  • Traditional layoff patterns are changing, with companies increasingly laying off younger workers before older (more expensive) workers (a factor that is at least partially attributable to fear of age discrimination suits and the unwillingness to lose critical skills) and of laying off men faster than women (a pattern which, while occurring across all educational levels, is particularly pronounced among college graduates); and
  • A housing market-induced decline in worker mobility, which makes it particularly difficult for people in economically distressed areas to move to more promising localities.

What does all this mean for the workforce of the future? Although I will look at this in much greater depth in future blogs and reports a few implications jump out.

Consider, for example, the dramatic reduction in the percentage of men that are graduating from college (compounded by a growing percentage of men being laid off). This has the potential of effectively reversing traditional gender roles. It will certainly have profound implications within business, where more and more men will report to women managers. It may have even greater societal implications, with women playing greater roles in local and national politics and a rapidly growing percentage of men playing primary roles in raising families and caring for parents.

A significant delay in the retirement of Baby Boomers (to the extent it occurs) has the potential of helping many companies in the near term, but of creating big corporate, societal and economic changes over the long term. The good news for companies is that a significant delay in Baby Boomer retirement will bail many out of their failure to plan for huge demographic shifts and the associated loss of institutional knowledge. But the negatives are numerous. First, aging workforces will cost companies much more in salary and benefits. More importantly, higher costs, combined with an anticipated slow recovery, will dramatically limit job openings and advancement opportunities for younger workers. Some careers will just be delayed. Others will be permanently sidetracked. But companies with be deprived of a critical supply of management talent and families and communities will be deprived of the income associated with productive careers.

U.S. students’ rapidly declining interest in SEMIT is even more portentous. First, technology-based industries tend to create large numbers of high-paying jobs and generate large volumes of high-margin exports. Worse still, even the most staid industries are being forced to become technology industries. The future of autos, we are being told, is in new, fuel-efficient designs. Even utilities are being forced to go high-tech, with the need to move to clean coal and renewable energy sources, and to build and manage smart infrastructures. Hopefully, factors such as declining financial industry opportunities, growing interest in sustainability and new education incentives and programs (such as those that encourage math and science education) will increase domestic interest in SEMIT education and careers. If not, the U.S. will hopefully recognize the necessity of encouraging and better utilizing the gift of foreign-born talent that is being nurtured by our universities.

Posted in 21st Century Careers, Business Trends, Creating the 21st Century Workforce, Economic and Political Forces, Economic Forces, Job and Career Opportunities, Skills Requirements, Societal Forces, STEM Careers, Technology's Impact on Job Skills, Workforce Trends | No Responses »
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