Offshoring of Service Jobs

Many previously-nontraded services have become tradable, or are expected to become so, as a result of technological advances in information technology. This situation has raised concerns about the future of jobs and workers' incomes in advanced countries, especially in the United States. However, a review of the U.S. evidence shows that the current extent of service offshoring is very modest in the United States, not only as a share of GDP but also in terms of its contribution to worker displacements. Service offshoring is currently a minor part of the overall international economic competition that the United States faces. Service offshoring appears to have been relatively intense for IT occupations, but the employment and wage trends in those occupations still compare favorably to U.S. averages. While offshoring might become much more significant in the future, a closer look at occupation details reveals that most U.S. service jobs are not suitable for performing remotely from abroad, even when some significant cultural and institutional barriers are ignored. In addition, a range of transaction and adjustment costs slow offshoring growth, and it would take a long time, possibly decades, for offshoring to attain its potential limits, although the available estimates of those limits and when they would be reached are very uncertain. This paper's assessment is that the share of existing jobs in the United States that have the possibility of exposure to competition from service offshoring is limited to 10 to 20 percent, and the impact will be sufficiently gradual to blend in with the ongoing ordinary structural changes in the U.S. economy.