Globalisation and Offshoring

By way of explanation of my blogging absence I present a press release on last week's "offshoring" conference at the University of Nottingham featuring none other than Alan Blinder (Princeton) and Elhanan Helpman (Harvard) (who gave the World Economy lecture the evening before on a related topic).

It was interesting to see Alan Blinder present his controversial hypothesis on the potential adjustment costs associated with this "second industrial revolution". However, his analysis seemed to simply repeat what Thomas Friedman wrote about in the "World in flat" a number of years ago and that I read in early 2006. That is not to say he is wrong and it is good that someone is pushing this angle if for no other reason that for academics to take this issue seriously (or not so seriously).

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Sending jobs abroad creates thousands more jobs in the UK

The growing trend for British firms to send jobs overseas has actually helped boost employment in the UK, creating thousands of jobs according to new research.

Economists at the Globalisation and Economic Policy Centre (GEP) at the University of Nottingham say their research contradicts common perceptions that British firms are exporting jobs overseas to India and China simply to cut costs, leaving many here unemployed.

GEP economists analysed data from more than 66,000 UK firms over a period from 1996 to 2005. The results of the study - the largest ever carried out into the offshoring” phenomenon – showed that far from increasing unemployment in the UK, the policy had resulted in the creation of 100,000 extra jobs and an increase of £10bn in company turnover.

GEP Centre Director, Professor David Greenaway said: “People fear their jobs are being exported to countries like India and China where labour is cheaper, but the picture is far more complex than that and much more positive. “It would seem that firms that offshore part of their production process or service provision overseas become more efficient. This boosts productivity and turnover and as a result these firms grow and end up employing more people at home, not fewer.”

But Professor Greenaway said there were losers from the offshoring phenomenon. He said: “Offshoring does lead to increased job turnover and a change in the skill mix in a firm. The winners are those who have the skills required by firms that are offshoring and growing; the losers are those who cannot adapt.

“The lesson for policymakers is that offshoring is to be embraced, not feared, but that we need to continually invest in upgrading the skills of British workers to increase their adaptability and help smooth the transition from one job to another.”
The research also exploded another offshoring myth. Report co-author, Dr Richard Kneller said: “The common perception of offshoring is that its largely low paid call centre jobs being exported to lower wage economies like China and India, but that’s not the case.

“If you think of manufacturing and the production of parts, then it is skilled work. If you look at car manufacturing, Ford may make engines at Dagenham but gear boxes in Spain; if you think of Airbus – Britain makes the wings and engines, France the bodies. Most offshoring is actually to similarly developed European nations and the US, where the language skills are better.”

And he said Britain is also a major beneficiary of offshoring. “In the services sector Britain has a reputation for areas like finance and creative media and overseas firms will offshore work in this area to UK firms.”

The GEP research findings are to be presented at a major conference on offshoring to be held at the University of Nottingham later this month, which is expected to attract some of the world’s leading economists and experts on the subject as well as senior figures from the policymaking community.

Notes to editors:
This research is presented in a 120 page report: The Economic Impact of Offshoring. A useful 6 page summary has been prepared for the Offshoring Conference (details below) - pdf copies can be emailed on request.

GEP Conference on Offshoring 20th and 21st June.

To be held at the University of Nottingham. The programme starts with a
‘Policy Forum’. Speakers include:

• Alan Blinder, Princeton
• Heather Booth di Giovanni, UK Trade and Investment (Department for
Business, Enterprise and Regulatory Reform [BERR])
• Alex Hijzen, OECD
• Jonathan Portes, Department for Work and Pensions
• James Watson, Department for Business, Enterprise and Regulatory Reform (BERR)

Speakers from the academic community include:

• Mary Amiti, New York Federal Reserve Bank;
• Giorgio Barba Navaretti, Milan;
• Claudia Buch, Tübingen;
• Karolina Eckholm, Stockholm;
• Peter Egger, University of Munich;
• Joseph Francois and Julia Wörz, Vienna Institute for International Economic Studies;
• Ingo Geishecker, Goettingen;
• Liza Jabbour, GEP, University of Nottingham;
• Eiichi Tomiura, Yokohama National University;
• Alex Hijzen / Richard Upward / Peter Wright, GEP, Nottingham;
• Holger Görg / David Greenaway / Richard Kneller, GEP, Nottingham.