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4.1 mn jobs to be offshored by '08: study

BS Corporate Bureau in Mumbai | July 22, 2005 12:36 IST

Around eleven per cent or 161 million jobs, out of a total 1.46 billion service sector jobs worldwide, have the potential to be off-shored.

However, the number of jobs that companies are actually expected to locate offshore to low wage countries by 2008 is only 4.1 million, according to a study on the Emerging Global Labour Market, conducted by McKinsey Global Institute.

Further, the 4.1 million jobs to be located offshore by 2008 comprises only one per cent of total service sector jobs in developed countries.

The study puts Canada, Germany, Ireland, Japan, the UK and US as mid-to-high wage countries, while Brazil, China, Czech Republic, Hungary, India, Malaysia, Mexico, the Philippines, Poland and Russia have been put in the low-wage category.

The gap between potential and actual number of jobs to be offshored is largely due to company-specific barriers such as operational issues, management attitudes to offshoring and structural issues.

The study found that regulatory barriers do not play a significant role in deterring companies from offshoring jobs.

The retail sector has the lowest potential for offshoring. The study found that only 3 per cent of its employment could be performed offshore. Packaged software has the highest potential, with 49 per cent of its employment capable of being performed offshore.

The study also found that while 33 million people in a sample of 28 low-wage countries are graduates with up to seven years of work experience, only 13 per cent are suitable for employment in multinationals and available for hiring.

Wage levels for certain occupations such as engineering could double in low-wage countries, but will still remain at about 30 per cent of the levels for the same occupations prevailing in the US or western Europe. In developed countries, offshoring will not significantly impact wages or employment.

The report also highlights that Indian IT services companies will need to gear up for competition. While 50 per cent of engineers in Poland and Hungary are suitable to work in multinational companies, only 10 per cent of Chinese and 25 per cent of Indian engineers are suitable for the same.

The study involved analysing employment in eight industries including automotive, healthcare, insurance, IT services, pharmaceuticals, retail, retail banking and software. The labour and talent pool available in 28 low-wage countries and another eight mid-to-high wage ones were part of the analysis.

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