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Academy of Management

Export of jobs abroad has great potential for turmoil, scholars maintain

May 1, 2004

For more information, contact: Benjamin Haimowitz, HHaimowitz@aol.com

The public furor of a few months ago about the outsourcing of jobs abroad may have diminished somewhat, but the issue retains great potential for economic, political, and educational turmoil, in the view of business scholars convened by the Academy of Management.

The Academy, with over 14,000 members, is the largest organization in the world devoted to management research and teaching.

Commented Prof. Richard A. D'Aveni of Dartmouth, "What I'm amazed to discover is that a significant portion of jobs in several major industries is at risk right now... People watched the first wave of offshoring take place in manufacturing, and the economy survived by migrating to services. But now a major part of the service economy may undergo the same disruption, and people don't have another place to which they can run."

Prof. D'Aveni cited accounting as a profession particularly at risk in the near future as a result of outsourcing to India, along with jobs in strategy consulting, information technology, and financial services. "Low-cost knowledge workers may very well do to Wall Street what low-cost manufacturing workers did to Main Street," he said.

Equally alarming, in the panel's view, is the lack of ideas -- either among policy makers or in the universities -- about dealing with this problem. As Prof. Peter Cappelli of the Wharton School put it: "The most informed discussions taking place today about offshoring are led by consulting firms that are selling clients on the idea of going overseas."

The scholars expressed their views in a roundtable panel held via teleconference on May 18 under the auspices of the Academy of Management, one of a series of occasional forums the Academy is sponsoring on issues of public concern. The forums are posted on the organization's Web site (www.aomonline.org), where they can be accessed by members and nonmembers alike.

While there was general agreement that the export of jobs abroad could very well accelerate, not all the panelists were pessimistic about what the impact would be. Declaring himself an optimist, Raghuram Rajan, director of research of the International Monetary Fund, credited the American economy with "tremendous resilience...[O]nce the dimensions of the problem become clear, I think, companies and government will adopt clever ways to solve it."

But Wharton's Prof. Cappelli warned against "minimiz[ing]...the psychological impact of offshoring. It has the feel of a race to the bottom."

To which Prof. Rosemary Batt of Cornell, who does research on call centers, responded: "When it comes to low-wage jobs, it's more than a feeling; there is a race to the bottom with no institutional levers to put upward pressure on wages and employment security."

Also a matter of general agreement was that globalization and the export of jobs deriving from it would require profound changes in higher education, which thus far had scarcely begun to respond to the challenge. Commented Tom Kochan of MIT, "Our colleges and universities have a lot of catching up to do."

To which Prof. Martin Kenney of University of California, Davis added: "If all we're training our engineers to do is use the same curriculum as the Indians, who are being trained with an MIT curriculum available online, it's hard to see that our engineering students are being well served. Clearly, we have to start rethinking a lot of what we do in higher education."

The panel was as follows:

Sara L. Rynes (moderator), Murray Professor & Chair, Department of Management & Organizations, Henry B. Tippie College of Business -- University of Iowa

Rosemary Batt, Alice H. Cook Professor of Women and Work, Industrial and Labor Relations School -- Cornell University

Peter Cappelli, George W. Taylor Professor of Management, The Wharton School - University of Pennsylvania

Richard A. D'Aveni, Professor of Strategic Management, Amos Tuck Business School -- Dartmouth College

Martin Kenney, Professor, Department of Human and Community Development University of California, Davis

Thomas A. Kochan, George Maverick Bunker Professor of Work and Employment Relations, MIT Sloan School of Management

Raghuram Rajan, Economic Counselor and Director of Research, International Monetary Fund

The entire discussion, about 10,000 words in length, can be accessed on the Web site of the Academy of Management (www.aomonline.org).

Media Coverage:
Asia Pulse. Size of outsourcing of US jobs does not justify uproar. (Sunday, June 13, 2004).
Financial Times. Use your hands instead of your head for job security. (Wednesday, October 06, 2004).
Organization of Asia-Pacific News Agencies (OANA). Size of outsourcing of US jobs does not justify uproar. (Sunday, June 13, 2004).
Press Trust of India. Size of outsourcing of US jobs does not justify uproar. (Sunday, June 13, 2004).
The Washington Post. The Outsourcing Threat is A) Big, B) Small, C) Both. (Sunday, June 13, 2004).

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