Outsourcing not the job killer once feared: Statistics Canada

Anne Howland, CanWest News Service

Published: Tuesday, May 22, 2007

OTTAWA - The move by Canadian companies to outsource some of their operations to lower-wage countries such as China and India has not had the effect on domestic employment that many feared, a new study suggests.

There is no clear evidence that "occupations potentially subject to service offshoring displayed smaller employment growth than other occupations in recent years," said Statistics Canada in a report Tuesday.

The agency identified industries with a large share of occupations subject to foreign outsourcing of services, or service offshoring, in 1994 and 1995. Then it compared employment trends in these industries to those observed in other industries between two periods: 1987 to 1995 and 1996 to 2006.

"Overall, the findings suggest that if foreign outsourcing of services has indeed had an impact on Canadian employment, this impact is likely to have been modest so far," said the report.

The findings run contrary to fears that began in the early 1980s, when it was argued that many manufacturing jobs in advanced economies were being lost to developing countries, Statistics Canada noted.

"Recently, some observers have argued that employers now use foreign outsourcing not only for manufactured goods, but also for labour services such as engineering, informatics and payroll administration," the agency said. "Concerns have been expressed that employment growth in these occupations might decline or even stop. The study found little evidence consistent with that view."

A PricewaterhouseCoopers survey from November 2005 found that 39 per cent of respondents in information and communications technology thought the impact of globalization of knowledge work on the Canadian labour force would be bad in both the short and the long term. In other industries, 29 per cent agreed with the IT people that offshoring would be bad for Canadian workers.

According to Tuesday's Statistics Canada study, between 2000 and 2006, employment in occupations potentially affected by service offshoring grew 1.8 per cent per year, on average. Employment in other occupations grew at the same rate, it added.

"While employment grew a solid 2.8 per cent per year in professional occupations potentially subject to service offshoring, it was almost stagnant among clerical occupations potentially subject to service offshoring," the agency said. However, other factors besides outsourcing were likely to blame for the decline in job growth for clerical positions, such as automation of tasks previously performed by clerical employees, Statistics Canada added.

In fact, the study suggested, Canada has actually seen a net gain from the outsourcing trend.

In 2004, Canadian firms imported roughly $18 billion of computer, information and other business services. Of these, roughly $1 billion came from non-OECD countries such as India and China, Statistics Canada said.

At the same time, exports of computer, information and other business services totalled roughly $20 billion. Of this, $3.5 billion went to non-OECD countries, the agency added.

"This indicates that while some Canadian firms were increasingly involved in the foreign outsourcing of services, others were also benefiting from foreign insourcing," the report said.