Although the practice of offshoring is growing among companies in developed countries, a wide gap exists between the number of service jobs that they could locate remotely and the actual number of jobs that they have located offshore, or plan to offshore, by 2008.
Although 11 percent of the world's 1.46 billion service jobs can be theoretically performed remotely, the number of those jobs offshored by 2008 will remain modest. An estimated 1.1 percent of total demand for labor in services will go offshore due mainly to internal company barriers.
Only a small fraction of employment that could potentially go offshore will ever do so.
Eleven percent (161 million jobs) of the 1.46 billion service jobs worldwide could be performed remotely. As a rule, the more customer facing functions a sector has, the lower its potential to resource those functions remotely. Consequently, this potential varies depending on the industry. The lowest potential is in retail, for example, where 3 percent of employment may be globally resourced. Packaged software, however, could see 49 percent of its services work done remotely.
We estimate that total offshore employment amounted to about 1.7 million jobs in 2003. In 2008, total offshore employment will reach an estimated 1.1 percent of total demand for labor in services from developed countries, equivalent to 4.1 million employees.
Some occupations are also more amenable to remote employment than others. Engineering and finance and accounting occupations are the most amenable (52 percent and 31 percent, respectively), while generalist and support staff occupations are the least (9 percent and 3 percent, respectively) because of the close interactions they entail with customers or colleagues. However, because every industry employs many generalists and support staff, these occupations have the highest number of jobs that could be filled by remote talent—a combined total of 26 million positions.
The gap between the current and potential levels of adoption is mainly explained by internal company barriers rather than regulatory deterrents. Most notably operational issues, management attitudes to offshoring, and structural issues keeping companies from outsourcing services.
Offshore employment will grow gradually, making no sudden impact on labor markets overall in developed countries. In fact, its growth will have less impact on patterns of employment than the decline in manufacturing employment developed countries have already experienced.