"A piece in the Herald-Leader that reported that more college graduates are staying in Kentucky raised a question with me — in what jobs? The U.S. Department of Labor reports that only 25 percent of the jobs in the U.S. economy really require college degrees. What are the jobs filled by this increasing number of Kentucky grads staying at home? Do they really require a college degree? Are the jobs in the growing services sector? If so, there may be cause for alarm.
We are in the midst of the third Industrial Revolution. The first was the shift from agriculture to manufacturing. Economies of scale in agriculture and an efficient transportation system bringing products to market resulted in the shift of labor from agriculture to manufacturing. The second involved the shift from manufacturing to services. Over the last fifty years, we have witnessed the decline of manufacturing in the United States as an increasing share of our manufacturing industry is offshored, i.e., moved outside the country. Services were once thought to be immune to trade. However, because of advances in technology, which make long-distance electronic delivery possible, tradability has now become an issue with services. The third Industrial Revolution is the Digital Age. Now, anything that can be digitized can be offshored.
Alan Blinder, former vice-chair of the Federal Reserve Bank and a Princeton economist, examines service tradability in the March/April 2006 issue of Foreign Affairs in a piece titled "Offshoring: The Next Industrial Revolution." Dr. Blinder examines the issue of service trade by dichotomizing trade into personal service and impersonal service. The distinguishing characteristic is that personal service is conducted face-to-face, such as having blood drawn or buying a hamburger. For both of these, the service provider must be present with the service receiver. Impersonal service is exemplified by completing a loan application over the Internet.
Dr. Blinder estimates that approximately 30 million to 40 million service sector jobs in the United States will be susceptible to offshoring. Many are jobs performed by college graduates. Every service area, both personal and impersonal will be susceptible. U.S. x-rays are now being read in India. Financial transactions are completed in Hong Kong. Engineering drawings are prepared in Korea; U.S. tax returns are processed in India. Delta Airlines operates call centers in India. Offshoring will continue to grow. The difficult questions to answer are to identify which industries and which occupations will remain.
J. Bradford Jensen and Lori G. Kletzer of the Institute for International Economics examined service tradability in their paper "Tradable Services: Understanding the Scope and Impact of Services Offshoring." They placed industries into three categories: those not susceptible, those somewhat susceptible, and those very susceptible. Industries such as newspaper publishing, credit unions, veterinary services, and hospitals are safe. Others such as data processing services, credit card processing, architectural and engineering services, and travel arrangement and reservation services are somewhat susceptible. Finally, industries such as footwear and leather goods repair, scientific research and development services, scientific and technical consulting services, and software publishing are very susceptible to offshoring.
The U.S. Department of Labor estimated the fastest growing occupations in the country between 2004 and 2014. The top ten are:
Home health aides
Network systems and data communications analysts
Medical assistants
Physician assistants
Computer software engineers, applications
Dental assistants
Personal and home care aides
Network and computer systems administrators
Database administrators
Physical therapists
It is interesting that these occupations are within two industries: health care and information technology.
In today's world, everyone requires education beyond high school, but not everyone requires a four-year degree. The simple fact that 75 percent of the jobs in the economy do not require a four-year degree argues that a higher priority and more resources be given to the Kentucky Community and Technical College System and to apprenticeship programs that will train workers for the jobs that will be in demand.
Kentucky must begin to study the impact of offshoring on the state's economy and begin to invest in the targeted development of occupations that will be in demand in the future. Simply doubling the number of college graduates in the state does not insure that future demand will be met. Consideration must be given to the occupations for which students are being prepared.
William Shakespeare wrote in King Richard III, "A horse! A horse! My kingdom for a horse!" For some in Lexington, this may be apropos, but for me, there have been many times in the past fifteen years that I have cried, "A techie! A techie! I'll give anything for a computer techie!" Doubling the number of English literature (no offense intended) graduates will not help me.
William F. Maloney, Ph.D., is the Raymond-Shaver Chair and Professor of Construction Engineering and Management at the University of Kentucky, College of Engineering, Department of Civil Engineering.