Governments still oblivious to offshore teams impacting youth unemployment

Remarkably, there still seems to be no comment from either state or federal governments about the impact of offshore employment upon youth employment or employment generally.

This is possibly because there is little that can be done to prevent the trend, but more likely that they are slow in catching on to the scale of the issue.

Over two years ago I detailed in my book The Third Wave just how unemployment, and particularly youth unemployment, was predictably going to increase as global resourcing became the norm within small and medium businesses (SMEs) in Australia.

Somewhere between 50,000 and 100,000 roles will be hired by Australian businesses this year in the Philippines alone. There is no government tracking of the official numbers, so this is my own estimate, based upon a scaled assumption of the number of clients we are presently working with. These roles are a full range of “white collar” office-based jobs including IT support, software development, construction, financial services and manufacturing, as well as the more traditional sales and administration roles.

Without moderating factors we are ultimately facing the exodus from Australia of up to a million office jobs, which is nearly one tenth of our workforce. This trend is predicted by the very nature of capitalism itself, which always strives towards producing a higher quality product or service at a lower price.

When it costs five times the price to hire a young Australian graduate compared to a skilled worker with five years’ experience, then demand for young workers is going to fall.  This is guaranteed by young workers often having negative productivity – that is, they usually need a large investment in workplace training and coaching before their work output is worth more than their wage. Several studies have noted that, in general, workers under 25 have the lowest productivity.

It should come as no surprise that cash-strapped and time-poor SMEs are choosing to hire skilled staff offshore rather than hire and train young workers for five times the wage. SMEs provide as much as 90% of all our employment, yet only global-resourcing by large corporates gets government attention because individual large businesses can shift hundreds or thousands of roles each. The average SME with a team in the Philippines has 2-5 full-time staff, which of course is insignificant and not newsworthy. But when there are 50,000 businesses with 2-5 full-timers offshore, the impact is much larger than Telstra with its newsworthy 14,000 staff in the Philippines.

Fighting against global-resourcing is, to my mind, an impossible battle in a capitalist, import-oriented and consumer-driven society such as Australia. If Dick Smith can’t convince many of us to pay an extra 40 cents for Australian-grown peanut butter, what evidence is there to expect we will pay a large premium for a large range of Australian produced services?

Furthermore, it is very hard to identify and prevent, or tax, global resourcing within any business, and the extreme financial advantages it produces to business ensure its ongoing popularity.

The effects are also not all negative for Australia, as global resourcing does improve international competitiveness (i.e. improved exports and balance of trade) and financial stability for businesses and therefore also improves the value and tenure of highly skilled workers. Coming out of a period of record business insolvencies, anything which improves business resilience could be argued as a positive effect.

Rather than focusing upon reversing a global trend, as a nation we need to figure out how to adjust to it and benefit from it. The highest priority in my mind is improving the value and job-readiness of young employees. This must urgently become a focal point by governments and educational institutions if we are going to avoid a generation of unemployed youth and all of the associated social problems.

Scott Linden Jones is a global-resourcing expert and the founding advisor of Easy Offshore. Easy Offshore runs educational seminars and consulting for businesses, on how to adapt their businesses to take advantage of global-resourcing. www.easyoffshore.com.au