ICT skills and employment and potential offshoring

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ICT skills and employment and potential offshoring

• UNI-PMS
• Barcelona, 19-21 June 2006
• Desirée van Welsum
• OECD

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Several pieces of work - forthcoming

• 2006 OECD Information Technology Outlook in
  particular
• Chapter 2 ICT trade and globalisation of the ICT
  sector
• Chapter 3 ICT-enabled globalisation of services
  and offshoring
• Chapter 4 China, Information Technologies, and
  the Internet
• Chapter 6 ICT skills and employment
• Potential impacts of international sourcing on
  different occupations

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Definitions used

• ICT specialists e.g. software programmers, but
  also cable fitters
• ICT users basic and advanced (and including
  specialists) intensive use
• ICT-using occupations potentially affected by
  offshoring
• Based on offshorability attributes
• Clerical and non-clerical / professionals
• Offshoring geography, not ownership

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Chapter 6 ITO ICT skills and employment

• Note classifications not harmonised
  internationally
• ICT Specialists lt5 of total employment

Most countries experienced an increase (exc.
Portugal)
5

• ICT users (basic and advanced, and including ICT
  specialists) lt30 of total employment
• Most EU15 experienced an increase (except Italy),
  but the US, AUS, and CAN declined (levels are not
  directly comparable, but can look at trends)

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Measure of relative unemployment

• Calculated as the ratio of unemployed to
  employed, i.e. an increase in the ratio implies a
  relative worsening in the employment position
  between 1998 and 2004
• Specialists relatively worse off than users
• Specialists worse in 7 out of 12 countries
• Users worse in 4 out of 12 countries

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Changing demand for specialist skills

• Increasingly, ICT specialist skills alone are no
  longer enough instead technical skills other
  skills, e.g. business, management, marketing
  skills
• 2 speed labour market for ICT specialists?!
• demand for basic skills in decline as basic tasks
  increasingly automated/digitised/offshored
• but more complicated tasks (combinations of ICT
  and other skills) increasingly in demand and also
  more complicated to offshore
• Need for new skills vs. need for old skills
  (legacy skills)

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Meeting demand

• Education difference between ICT specialists
  skills and (basic) ICT users skills
• Diffusion of ICTs in general and increasing use
  of ICTs in schools will mean basic ICT skills
  increasingly common
• But formal (tertiary) education system may not be
  flexible enough to respond to rapid changes in
  skills needs that result from rapid changes in
  technology
• Training multi-stake holder partnerships, vendor
  certificates may provide more flexible options
• Migration
• Outsourcing / Offshoring

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ICT-enabled offshoring

• Rapid technological advances in ICTs have
  increased the tradability of services, combined
  with ongoing liberalisation of trade and
  investment in services
• As a result the production of services has become
  less location dependent can be produced anywhere
  in the world and then delivered using ICTs
• Skills become an increasingly important factor in
  locational decisions
• Skills shortages have also been mentioned as a
  factor driving offshoring

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No official data measuring offshoringuse
indirect sources, including

• Trade data
• if service activities are sourced
  internationally, the country receiving the
  activities must export services back to the
  country of origin
• Many countries often mentioned as receiving
  offshored services activities see strong growth
  of their exports, but many growing from low
  levels, and bulk of these exports still comes
  from OECD countries
• Employment and skills data
• Occupations potentially affected by offshoring
• Situation in non-OECD countries look e.g. at ICT
  skills, as proxied by number of computers,
  broadband subscribers etc., and tertiary education

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Chapter 6 ICT skills and employment

• ICT skills situation in countries receiving
  offshored services activities, e.g. China and
  India indicators show there is still plenty of
  scope for improvement
• Human capital already impressive in absolute
  numbers, while also still scope for further
  growth, e.g. tertiary education

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Employment Potential offshoring affects
occupations differently

• Select occupations that could potentially be
  offshored on the basis of offshorability
  attributes tasks that could potentially be
  carried out from any geographical location
• Intensive use of ICTs
• Output can be traded or transmitted with the help
  of ICTs (ICT-enabled trade in services)
• Work has high codifiable information or
  knowledge content
• Work does not necessarily require face-to-face
  contact
• Distinguish between clerical (e.g. back-office)
  and professional (e.g. engineers, scientists,
  accountants, economists, statisticians)
  occupations potentially affected by offshoring

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Potentially offshorable occupations in total
employment EU15, USA, CAN and AUS, 1995-2003
The differences in the levels are difficult to
interpret because the classifications have not
been harmonised, but the trends are revealing!
(USA 2003 is an estimate)
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Possible explanations for decline

• A ratio, so it is possible the top (employment
  potentially affected by offshoring) grows less
  fast than the bottom (total employment) happened
  in most cases only in the US there were
  absolute declines
• Confirms that offshoring does not have to result
  in lower employment but could result in slower
  employment growth in certain types of occupations
• Likely for there to be occupational and sectoral
  shifts
• Offshoring some potential offshoring has become
  actual?
• Differences in rate and speed of technology
  adoption and integration this could be expected
  to have an impact particularly on clerical
  occupations
• Aggregates mask differences by types of
  occupation

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Clerical and professional potentially offshorable
occupations
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The share of clerical occupations in employment
potentially affected by offshoring, 3-yr ave,
1995-2003
High gt60 Italy, Portugal
Low /- 30 Australia, Ireland, Sweden, UK, US
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Look at statistical associations

• The share of employment that is potentially
  offshorable (total, professionals, clerical) is
  related to a set of factors controlling for
• international openness (exports and imports of
  business services, measures of manufacturing and
  services FDI stocks)
• the national economic structure (the shares of
  services and high-tech industries in GDP, the
  share of ICT investment in total gross fixed
  capital formation)
• and economy wide framework influences (the OECD
  product market regulation indicator, trade union
  density and an indicator of human capital)

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Results impact of various factors differs for
different types of occupations!

• Exports
• Imports - (? displacement?)
• Net outward manufacturing FDI professionals, -
  clerical
• Net outward services FDI
• ICT investment professionals, insignificant
  clerical
• Services sector professionals, - clerical
• High-tech
• PMR -
• Union density - professionals, clerical
• Human capital

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Further work includes

• Improvement and further disaggregation of
  occupational selections in the analysis of
  employment potentially affected by offshoring
• Control for differences in ICT-content of
  occupations, over time and across countries
• Economic and social impacts of broadband
• Work on ICT-skills related migration

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References

• 2006 OECD Information Technology Outlook, in
  particular Chapter 6 ICT skills and employment
  (forthcoming)
• Potential impacts of international sourcing on
  different occupations (forthcoming)
• The share of employment potentially affected by
  offshoring An empirical investigation
  DSTI/ICCP/IE(2005)8/FINAL
• Potential offshoring of ICT-intensive using
  occupations DSTI/ICCP/IE(2004)19/FINAL
• 2004 OECD Information Technology Outlook, in
  particular Chapter 6 ICT skills and employment
• New perspectives on ICT skills and employment
  DSTI/ICCP/IE(2004)10/FINAL
• www.oecd.org/sti/offshoring
• www.oecd.org/sti/ICT-employment