The strike that crippled two of the nation's busiest shipping portswas settled this week, but the trend it spotlighted - the offshoring ofservice jobs - is expected to continue to grow across the USA.
Theeight-day walkout by clerical workers at the ports of Los Angeles andLong Beach largely centered on the outsourcing of their jobs overseasand elsewhere in the U.S., says Craig Merrilees, a spokesman for theInternational Longshore and Warehouse Union. Shippers denied outsourcingjobs, but the tentative settlement restricts the practice, according tothe Associated Press.
Yet service companies have beensending jobs abroad in large numbers the past decade to cut labor costs -a trend that accelerated in the recession and is expected to continuethe next few years before slowing after 2016. About 663,000large-company jobs in information technology, human resources, financeand purchasing - the category that includes the port workers - have beenoffshored since 2002, according to The Hackett Group.
By2016, the consulting firm estimates, another 375,000 jobs in the sectorswill be moved abroad. More than a third of the U.S. jobs in thoseindustries in 2002 will have moved offshore by 2016.
Most workersare employed directly by companies that previously used U.S. staffers,though some work for outsourcing firms. Hackett studied companies withat least $1 billion in annual revenue, noting they represent about 75%of the offshoring market.
India is the largest offshoring center. Service jobs also have gone to eastern Europe, the Philippines, China and Mexico.
Inother sectors, initially low-level jobs were offshored, such ashandling payroll or tracking purchase orders. Employers typically cancut labor costs by about 75%, Dorr says. In recent years, a growingnumber of higher-level jobs have moved overseas, such as benefitsanalysis and vendor management, though the cost savings for offshoringthose positions is only about 25%.The trend took off after companiesbegan contracting with programmers in India to help with the massivepreparations for the Y2K computer bug in 2000, says Hackett researchdirector Erik Dorr.
"Organizations now feel morecomfortable moving up the value chain," Dorr says, noting, for example,that India's education system is improving and turning out top-notch jobcandidates.
Since 2005, legal services such as documentreview, contract drafting and regulatory communication increasingly havebeen offshored, particularly to India, says Greg McPolin, managingdirector of Pangea3, a legal outsourcing firm. Indian attorneys handlework that in the U.S. is sometimes done by paralegals and at a 40% to60% cost savings, he says.
Several thousand legal jobs havebeen offshored, estimates Edward Brooks, founder of The LPO Program, alegal consulting firm.
"In the current environment, it is more important than ever that ...the support we provide to clients adds value without adding unnecessarycost," law firm Clifford Chance said in a statement.
Onceservices are offshored, there's little chance they'll come back to theU.S., Dorr says. By contrast, manufacturers have returned someproduction to the U.S. recently, largely because of a narrowing wage gapbetween the U.S. and China, rising shipping costs and falling U.S.energy costs - factors that generally haven't affected service jobs.
One exception: call-center jobs. About 500,000 were offshored from2006 to 2010, according to the Communications Workers of America. Manyhave returned to the U.S. the last few years because of cultural gapsbetween representatives and customers that hurt sales, says Hal Sirkin,senior partner of Boston Consulting Group.
Yet CWA spokeswoman Candice Johnson called the jobs that have come back "a drop in the bucket."