Australia faces loss of 850,000 service jobs: report

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Australia faces loss of 850,000 service jobs: report

A major study of the services sector has shown that Australia faces losing 850,000 jobs offshore - and could be losing them at the rate of 1000 jobs a week over the next 20 years.

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A major study of the services sector has shown that Australia faces losing 850,000 jobs offshore — and could be losing them at the rate of 1000 jobs a week over the next 20 years.

The study, Off-Shore and Off Work, was done for the services unions of Australia by the National Institute of Economic and Industry Research.

Industries in 'poor shape'

It says Australia’s services industries are ‘in poor shape’ and not holding its own their own in international markets for traded services.

‘[The sector] is in fact it is losing market share — more jobs than ever are being moved off-shore,’ the report says.

The report estimates that Australia could lose up to one in ten service sector jobs over the next 20 years.

‘About 850,000 jobs are at risk,’ it says. ‘Australia stands at the cusp of a vicious cycle of off-shoring jobs, losing skills and competencies from the domestic economy and as a result, losing more jobs off-shore.'

Vicious cycle of job loss

‘The clock is ticking for concerted action to address this vicious cycle of job loss, skills loss and loss of competencies. A worst case scenario could see Australia losing 1000 jobs a week off-shore over the next 20 years.

‘Unlike the experience of Australia’s manufacturing sector, these would not be the lower skilled jobs. Almost all would be high-skill or intermediate-skill jobs. The low-skill jobs requiring face-to-face communication would remain.'

Sector would be de-skilled

‘The sector would effectively be de-skilled. By highlighting the threat to the sector and the jobs at risk, this report is both a wake-up call and a call to action.’

The report says the fall in telephony costs from the 1980s and the introduction of broadband in the 1990s eliminated the natural barriers of protection for selected service industries.

‘Lower communication costs create the possibility for many services to be performed or delivered from virtually anywhere in the world,’ the report says. ‘This trend will over time create international centres of expertise for service development, production and delivery.'

‘A number of countries have been actively pursuing opportunities to develop globally focused service economies. Australia does not have such a strategy. It is losing ground and jobs.’

Off-Shore and Off Work identified two types of off-shoring: ‘industry off-shoring’ where a whole service division or firm moves to another country, and ‘occupational off-shoring’ where only some of the functions are moved.

This study finds that (for the base case) 850,000 Australian jobs are at risk of being lost offshore over the next two decades.

One in 10 jobs in danger

‘This represents just under 10% of total service sector employment and 8.2% of total employment,’ the report says. ‘As the population grows, the absolute number of jobs at risk will increase to about 1.1 million even if the percentage remains unchanged.’

It says the following seven characteristics identify the types of service jobs most at risk of going off-shore:
  1. heavy reliance on information technology and routine or rule-based work
  2. lack of need for personal contact with customers
  3. wage cost savings in low-wage countries that outweigh productivity losses
  4. tradability
  5. availability of skills abroad
  6. labour intensiveness, ease of physical relocation and separability of jobs tasks from other parts of the production process
  7. absence of cultural, institutional and legal barriers.

‘In the longer term, the potential for off-shoring will increase because the speed, capability and coverage of broadband infrastructure will steadily improve and international service centres will continue to develop scale and skills that provide global competitive advantage,’ the report says.

Virtual office a reality — location doesn’t matter

‘At some point in the future, the virtual office will become a reality. Only services that require face-to-face contact (nursing, waiters) will be tied to a particular location.'

Services industries will be based on a global workforce with firms seeking to maximise efficiency and competitive advantage based on global availability of skills, scale, quality, innovation and cost competitiveness.

‘At this point, employment in many parts of the sector will be premised on globally contestable remuneration and costs.’


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