Friday, March 04, 2011

The problem with the Knowledge Economy

I was early on the outsourcing bandwagon and actually wrote my first piece of Wall Street Research on the coming wave of outsourcing over 15 years ago.

Over time we've seen outsourcing grow from corporate phone centers to include relatively high levels of research and development. I read this opinion piece from the Guardian today and I have to say that I tend to agree with his theory. The future for western citizens looks increasingly dim because corporations are embracing a new model that allows them to keep 10-15% of their best and brightest domestically while outsourcing or using offshore employees to handle every other level of corporate activity.

I think this is a remarkably short-sighted approach because you can not train the next generation of leaders for your firm if you gut the entire mid-level management and research of your company, but this apparently the model that most companies are now pursuing. Much of this shift is happening underfoot without many western citizens being aware of the shift. While, I agree with many of the points made in this opinion piece, I'm equally disturbed by these trends. Maybe I should forget saving for college and instead just buy land in Hyderabad with the kid's college fund.

"Knowledge work", supposedly the west's salvation, is now being exported like manual work. A global mass market in unskilled labour is being quickly succeeded by a market in middle-class work, particularly for industries, such as electronics, in which so much hope of employment opportunities and high wages was invested. As supply increases, employers inevitably go to the cheapest source. A chip designer in India costs 10 times less than a US one."

But now the middle office is going too. Analysing X-rays, drawing up legal contracts, processing tax returns, researching bank clients, and even designing industrial systems are examples of skilled jobs going offshore. Even teaching is not immune: last year a north London primary school hired mathematicians in India to provide one-to-one tutoring over the internet.

They assumed "knowledge work" would always entail the personal autonomy, creativity and job satisfaction to which the middle classes were accustomed. They did not understand that, as the industrial revolution allowed manual work to be routinised, so in the electronic revolution the same fate would overtake many professional jobs. Many "knowledge skills" will go the way of craft skills. They are being chopped up, codified and digitised. Every high street once had bank managers who used their discretion and local knowledge to decide which customers should receive loans. Now software does the job.

Aspirant graduates face the prospect not only of lower wages, smaller pensions and less job security than their parents enjoyed but also of less satisfying careers. True, every profession and company will retain a cadre of thinkers and decision-makers at the top – perhaps 10% or 15% of the total – but the mass of employees, whether or not they hold high qualifications, will perform routine functions for modest wages.

Ugh, time to get some prozac.

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