"Fear" and Offshoring: The Scope and Potential Impact of Imports and Exports of Services

J. Jensen () and Lori Kletzer ()
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Lori Kletzer: Peterson Institute for International Economics

No PB08-1, Policy Briefs from Peterson Institute for International Economics

Abstract: Commentators, including Princeton University's Alan Blinder, estimate 40 million jobs could be at risk of being offshored over the next 20 years and suggest American workers should specialize in services that can be delivered face-to-face. In contrast, Jensen and Kletzer expect the process of globalization in services will proceed much as it has in manufacturing: They estimate only 15-20 million jobs are at risk of being offshored to low-wage, labor-abundant countries; approximately 40 percent of these jobs will be in the manufacturing sector, long considered "at risk." They expect these losses to be offset by job gains in high-wage activities from services exporting. The United States will retain its comparative advantage in high-skill, high-wage production and increase these activities in tradable service industries as trade barriers diminish. While the loss of low-wage activities that are offshored and the gain from high-wage service exports will cause dislocation, the globalization of services production is likely to have productivity-enhancing effects similar to the impact of globalization in the manufacturing sector, offering significant potential to improve living standards in the United States and around the world.

Date: 2008-01
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