By 2008, U.S. companies are expected to offshore 2.8 million jobs, affecting less than 2 percent of all service employment. This is far fewer than the normal rate of job turnover in the economy: 4.7 million Americans started jobs with a new employer in May 2005.
Nonetheless, while the U.S. economy gains from offshoring and other forms of trade, none of the benefits flow directly to those who undeniably suffer as a result – those workers whose jobs move overseas. Companies and governments can – and should – do more to help citizens cope with the faster rate of job change.
The U.S. ranks at the low end of what developed nations allocate to policies that assist displaced workers, spending only 0.5 percent of GDP. Further spending is necessary.
For example, job retraining credits and continuing education grants give workers a chance to build those skills that are in demand. Portable medical insurance plans and pension benefits are also essential to a workforce changing jobs more frequently.
Companies benefiting from offshoring could provide generous severance packages and fund wage insurance programs that make up some or all of the difference between workers’ previous wages and their new ones, thus encouraging them to get back into the workforce quickly and avoid long-term unemployment.
These measures – if properly implemented – would cost only a fraction of the economic benefits that offshoring will bring. Launch this perspective (PDF - 205 KB)
Shaking up the labor movement: An interview with the head of the Service Employees International Union Andy Stern discusses his ideas for reversing the long decline of US organized labor. Read more on the McKinsey Quarterly site
Perspective — Exploding the myths Offshoring benefits both the U.S. and developing countries. The challenge is in making sure everyone gets a piece of the pie. Read more
The emerging global labor market A three-part series explores the impact of offshoring services on specific industries, economies, wages, and employment and how companies should select offshore locations. Read more
