Potential ICT-enabled Offshoring of Service Jobs in Belgium [ Article 2007051801 - 18/05/2007]

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The present paper follows up on the longstanding tradition of analysing trends in relocation or offshoring at the Federal Planning Bureau. Replicating and extending a method developed by the OECD, it provides a rough estimate for Belgium of the proportion of service jobs at risk of being offshored in the wake of information and communication technology (ICT) developments, and compares the results for Belgium with results for the EU15 and the US. Occupational employment data from the Labour Force Survey are used to produce this estimate by identifying service jobs that could possibly be offshored due to ICT-enabled tradability.

In practice, two types of occupations are distinguished on the basis of several characteristics: those that are at risk of being offshored and those that are not. The service jobs at risk of being offshored are identified through the following four characteristics: people in those jobs are likely to make intensive use of ICT in order to produce their output; their output can be traded/transmitted with the help of ICT (ICT-enabled trade in services); the work has a high information or “knowledge” content; and the work does not necessarily require face-to-face contact. This allows to draw up a list of service occupations, which can be considered as ICT-using and at risk of being offshored. The share of those occupations in total employment can then be estimated.

Before interpreting the results of the application of this method, it must be emphasised that this approach does not lead to an estimate of the actual magnitude of service offshoring, but rather to an indicator of the offshoring potential in a country or industry, i.e. the number of jobs that could eventually be lost.

The results of applying this method show that the share of jobs at risk of being offshored due to ICT-developments is lower for Belgium than for the EU15 or the US. It stood at 17.5% in 2005. Nevertheless, there was an upward trend in this share over the period 1993-2005. This trend is most likely explained by a general increase in the importance of service activities. When conducting the analysis at the industry level it turns out that the highest ICT-enabled service offshoring potential can be found in financial and business services. Finally, a shift-and-share analysis provides evidence of a shift towards threatened service occupations within industries. This “within effect” dominates, whereas the “between effect”, i.e. the shift of employment towards industries with a high share of such threatened service jobs, turns out to be much smaller.

Further empirical investigation into the subject must focus on finding data for more direct measures of the magnitude of service offshoring and on determining the underlying causes of the rise or fall in ICT-enabled service offshoring potential.