Tuesday, March 23, 2004

WHO'S YOUR ENEMY?

You're 42 years old, you used to have a great job, but you don't anymore. Who's your enemy?

a. Outsourcing or, as John Kerry would phrase it, "Benedict Arnold CEOs" who ship jobs overseas.
b. The ongoing quest for increased productivity through the use of technology.

In could be either but as Ted Balaker writes, don't automatically assume "a", because the world is still becoming more and more automated. Most often the movement of jobs offshore is to take advantage of lower labor costs, where labor is a significiant portion of total cost. The elimination of some jobs, however, continues to be due to increased productivity available through the use of technology, and it isn't just on the assembly line. In fact, it's occuring in all industries (have you used the "self-checkout" line at the grocery?).

Many jobs over the past ten years have been eliminated forever in service businesses. Workflow automation software and "intelligent" systems have made automated decision-making and the processing of information much more efficient. More important, systems have become much more scalable (meaning they can absorb enormous volatility swings in volume without becoming overstressed), so businesses can expand/contract without having to hire/fire people as the economy moves up/down.

As an example, in banking we used to have many, many credit analysts. They would review loan requests, from a credit card application to a large corporate loan. After much analysis and exercise of seasoned judgment, they'd make a decision. Today, a human rarely looks at loans under $500,000 or so. The credit-granting decision has become totally automated. To give you an idea what this means, the mortgage industry has funded almost $4 trillion in loans over the past 12 months, about the same volume that was funded from 1990 to 1995. And, though the numbers are murky, the total employment in the industry hasn't even doubled. So how do you pull that off? One word -- technology. Not outsourcing.


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