The Implications of Service Offshoring for Metropolitan Economies

An examination of service offshoring—the movement of service jobs overseas—forecasts higher than average job losses in twenty-eight U.S. metropolitan areas between 2004 and 2015. Information technology jobs, and the metropolitan areas where they are concentrated, will be hardest hit. To cushion the service offshoring blow, the paper urges federal, state, and local leaders to together pursue policies that boost productivity and innovation, assist workers who are harmed by offshoring, and modernize approaches to economic and workforce development.

Findings

Service "offshoring"—the movement of service jobs from the United States to other countries, especially low-wage countries—has emerged as a concern of both political and business leaders in recent years. Using occupational data, this study projects the likely job losses from service offshoring between 2004 and 2015 in 246 U.S. metropolitan areas. It finds that:

# Twenty-eight metropolitan areas, with 13.5 percent of the nation's population, are likely to lose between 2.6 and 4.3 percent of their jobs to service offshoring, higher than the average loss among the metropolitan areas studied. Five metropolitan areas—Boulder, CO; Lowell, MA; San Francisco, CA; San Jose, CA; and Stamford, CT—are likely to lose between 3.1 and 4.3 percent of their jobs to service offshoring between 2004 and 2015, while 23 others are likely to lose between 2.6 and 3 percent of their jobs. However, 158 metropolitan areas are likely to lose no more than 2 percent of their jobs as a result of service offshoring.

# Large metropolitan areas and metropolitan areas in the Northeast and West are generally more vulnerable to service offshoring than small metropolitan areas or metropolitan areas in the Midwest or South. Job losses from service offshoring between 2004 and 2015 are projected at 2.4 percent for metropolitan areas with populations of one million or more but only 1.7 percent for metropolitan areas with populations below 250,000. About 2.3 percent of jobs in Northeastern and Western metropolitan areas are likely to be offshored, compared to 2.2 percent in Midwestern metropolitan areas and 2.1 percent in Southern ones.

# Metropolitan areas with large concentrations of information technology service jobs or backoffice jobs are generally more vulnerable to service offshoring than other metropolitan areas. Between 2004 and 2015, service offshoring is likely to cause the loss of 2.6 percent of jobs in metropolitan areas that specialize in information technology services and 2.4 percent of jobs in metropolitan areas that specialize in back-office services but only 1.9 percent of jobs in other metropolitan areas.

# At least 17 percent of computer programming, software engineering, and data entry jobs are likely to be offshored in particular metropolitan areas. Employment of computer programmers, data entry keyers, and software engineers (applications) is projected to fall by at least 17 percent between 2004 and 2015 in Bergen-Passaic, NJ; Boston, MA; Boulder, CO; Danbury, CT; Denver, CO; Hartford, CT; Minneapolis, MN; Nashua, NH; Newark, NJ; Orange County, CA; San Francisco, CA; San Jose, CA; Stamford, CT; and Wilmington, DE because of service offshoring. In Bergen-Passaic, 14 to 17 percent of customer service representatives' and insurance underwriters' jobs are projected to move abroad.

Overall, the loss of service jobs to offshoring in the near future will be modest. However, offshoring's impact will be greater in metropolitan areas with high shares of information technology or back-office service jobs and in particular occupations within metropolitan areas. To reduce vulnerability to service offshoring, federal, state, and local leaders should work in concert to pursue policies that boost productivity and innovation, assist workers who are harmed by offshoring, and modernize approaches to economic and workforce development.