November 15, 2005 - The Montreal Gazette reported on a new study by PricewaterhouseCoopers which commented on the outsourcing of knowledge work to lower-cost economies, a trend which will be keenly felt by the 2.4 million Canadians employed in knowledge work, including financial managers, purchasing agents, scientists, and mechanical engineers.
"For some occupations, many jobs will move", Price said. For others, there will be increased competitive pressure. A third group "with unique skills" will grow, including B.C.'s videogame industry, and Montreal's biotech sector, and (we interject to anticipate) lawyers skilled in international law.
Outsourcing to Lower-Cost Economies is a "Linear" Cost Savings Measure
Outsourcing knowledge work to a lower-cost economy is a linear cost savings measure if processes and technologies are kept the same, compared to the exponential savings that can come from improved technology and processes. To the extent that there are more workers available, the exponential improvements are closer to being realized, but outsourcing to distant economies is not the only, or even the most effective, way to save money.
How Outsourcing Affects the Value of Knowledge Work
The phenomenon of outsourcing knowledge work does not indicate that the value of knowledge workers has gone down. On the contrary, knowledge workers are much rarer than physical labour workers. However, knowledge workers have greater mobility than other workers, and can often command salaries equivalent to 'high-cost economy' skilled wages while simultaneously enjoying the lower cost of living of a 'low-cost economy', provided there is a close enough cultural match with the client firm. The only real difference is that their employer has accepted that they do not have to come on-site. At the same time, even for on-site work, there is very little preventing foreign workers from flying in from the 'global suburbs' to 'Western economic cities' to provide savings to high-enough-value large construction (physical labour) projects.
How Knowledge Workers May Respond to Outsourcing
Will knowledge workers move away? Or, perhaps as importantly, where will they choose to base their families?
If the value proposition of low-cost economies is attractive enough, the best and brightest knowledge workers may follow the savings.
