Offshoring- the Next Industrial Revolution
Blinder, Alan: Offshoring: The Next Industrial Revolution?
1. Please explain the core thesis put forward by Blinder
Alan Blinder explains the trend to Offshoring and its possibilities, naming this development the next Industrial Revolution. He emphasizes the fact of internationalization leading to an Offshoring of workforce, hence quitting labor in the home country and opening facilities abroad in order to gain competitive advantage through lowering manufacturing and distribution costs. An historical example is being brought up by the economist Bhagwati, who called this phenomenon kaleidoscopic comparative advantage and comparing it to Great Britain’s ancient comparative advantage in the textile industry because of their offshore colonies. The advantage of Offshoring nowadays obviously lies at countries with low wage costs, especially in China. Since world economy has already gone through two huge industrial revolutions, the first one changing the sector shares in favor of industry in the 19th century, the second one shifting industry labor masses into the service sector, Blinder now calls the current development the third Industrial Revolution, the “Information Age”. The information Age opens the labor market in the third industry sector, the service sector, to the open, ever more globalized world. The way of distinction of workforce is moving away from education and/or skills to the point of dividing the work into “deliverable through a wire” and those that are not. This deliberation is applicable to more jobs than obvious at first thought. Not only low-skilled jobs like typing services but also and particularly high-skilled jobs like radiologists and physicians have to fear being offshored in the long run. Consequently developing this idea the main distinction in future decisions, of whether to offshore or not, has to distinguish between personal and impersonal services, thus, the differentiation between services in which personal contact is necessary or
1. Please explain the core thesis put forward by Blinder
Alan Blinder explains the trend to Offshoring and its possibilities, naming this development the next Industrial Revolution. He emphasizes the fact of internationalization leading to an Offshoring of workforce, hence quitting labor in the home country and opening facilities abroad in order to gain competitive advantage through lowering manufacturing and distribution costs. An historical example is being brought up by the economist Bhagwati, who called this phenomenon kaleidoscopic comparative advantage and comparing it to Great Britain’s ancient comparative advantage in the textile industry because of their offshore colonies. The advantage of Offshoring nowadays obviously lies at countries with low wage costs, especially in China. Since world economy has already gone through two huge industrial revolutions, the first one changing the sector shares in favor of industry in the 19th century, the second one shifting industry labor masses into the service sector, Blinder now calls the current development the third Industrial Revolution, the “Information Age”. The information Age opens the labor market in the third industry sector, the service sector, to the open, ever more globalized world. The way of distinction of workforce is moving away from education and/or skills to the point of dividing the work into “deliverable through a wire” and those that are not. This deliberation is applicable to more jobs than obvious at first thought. Not only low-skilled jobs like typing services but also and particularly high-skilled jobs like radiologists and physicians have to fear being offshored in the long run. Consequently developing this idea the main distinction in future decisions, of whether to offshore or not, has to distinguish between personal and impersonal services, thus, the differentiation between services in which personal contact is necessary or
References: * Blinder, Alan: “Offshoring: The Next Industrial Revolution?” * Cecilia Johansson, Elisabeth Reischl: „Offshoring to China, A case study of an SMEs offshoring to China“