Monday, October 18, 2010

Industry Projections Gone Rogue… Part Deux

A brief follow-up on my previous post about the misconception of job “shifts” purported in a recent legal industry blog post.

This past week, the Wall Street Journal featured a piece on the topic of protectionist sentiments concerning offshoring. The article included a reference to a study that tracked job creation by 2500 multi-national corporations. The findings are eye-opening. Here is a excerpt of that article:

Most people treat outsourcing as a zero-sum game—one foreign worker replaces one American worker. But this is not how the dynamic global economy works. In 2007, Matthew Slaughter, an economist at Dartmouth's Tuck School of Business, published a comprehensive study of the hiring practices of 2,500 U.S.-based multinational companies.

He found that when U.S. firms hired lower-cost labor at foreign subsidiaries overseas, their parent companies hired even more people in the U.S. to support expanded operations. Between 1991 and 2001, employment at foreign subsidiaries of U.S. multinationals rose by 2.8 million jobs; during that same period, employment at their parent firms in the U.S. rose by 5.5 million jobs. For every job "outsourced" to India and other foreign countries, nearly two new jobs were generated here in the U.S.

Those new U.S. jobs were higher-skilled and better-paying—filled by scientists, engineers, marketing professionals and others hired to meet the new demand created by their foreign subsidiaries.

The article turns on its head the notion of outsourcing as a job drain. Contrarily, it’s actually a demand generator for domestic-based personnel.

While I would venture to say that the study referenced in the article is far from being entirely conclusive (I’m sure there are a number of factors impacting the recruitment practices of the respective firms), it is a very interesting to have a documented account of this phenomena.

Just one more thing to think about in the increasingly globalized legal profession.

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