Economic View: A new world at your service

Click to follow

As a general rule, the effects of any new technology take longer to come through than most people expect, and then, when they do, have greater significance than was at first appreciated.

As a general rule, the effects of any new technology take longer to come through than most people expect, and then, when they do, have greater significance than was at first appreciated.

We can see that with the internet and mobile telephony, two technologies that have now had a decade of mass-market development and have been rolled out more swiftly than just about any other previous technology. They have, for example, been adopted even more rapidly than the personal computer and much more so than the fixed-line phone.

But we are only just beginning to see some of the consequences on jobs and economic development. A few industries have been transformed - for example, the booking of airline seats. Email and, to a lesser extent, texting have changed the way we communicate with each other. And in the US there seems to have been a general uplift in productivity associated with the new technologies. As yet, though, there has been no radical change in the way people work.

Thus a decade ago some of us predicted that there would be a large increase in homeworking. It hasn't really happened. Yes, people do more work at home (and a lot of us find we are working in airport lounges), but the change is incremental rather than radical.

But now, a decade on, the pace may be quickening. Jobs really are changing both in their nature and their location and we may be approaching a tipping point when the pace suddenly quickens. There are a few straws in the wind. One is the moving offshore, mostly to India, of call centre jobs. BT plans to employ 2,200 people in Bangalore and Delhi by next spring. Accounting and IT jobs are also moving. Indeed, you could almost say that India is doing to western service jobs (or at least English-language ones) what China is doing to US manufacturing employment. John Snow, the US Treasury Secretary, reckons that the States has lost 2.4 million manufacturing jobs to China. I have not seen any comparable tally of the service sector jobs we have lost to India. So far it would be very much smaller, of course, but it seems to be growing fast.

This could only happen as a result of the communications revolution. You can outsource manufacturing to any place that can manage to produce the stuff, and has low enough costs to make it worth while. The cost structure in China for simple, manufactured goods is terrifying. One firm, I heard last week, calculated that even if it paid its workers here nothing, it would still be more expensive to make its products in Britain than in China. But this switch has been going on for years. It may have been speeded up by the communications revolution, but it wasn't started by it.

In services, by contrast, communications is key. Cheap international phone calls and internet technology have made it practicable to site any service that is delivered over the net anywhere in the world. (A lot of the international phone voice traffic now is carried over internet-style technology, which further helps to cut the cost.)

But if the technology is straightforward and cheap, the human capital has to catch up. It is much easier to train a manufacturing worker than one from the service sector. Services, in particular, require language skills, which gives India an important advantage over China. They also require practical familiarity with the kit.

So how far behind developed nations such as the US and UK are China and India in terms of access to technology?

If you look at computers per person, both countries lag far behind us (first graph). Relative to population, computer penetration is tiny. But if you look at mobile phones, the lag in China, at least, is much less dramatic - particularly in relation to America. On a quick tally there are actually more mobile phones in China than in the US (144 million against 127 million). India, for the time being, is pretty much a mobile-free zone, with fewer than 10 million for the population of 1,025 million.

But it will grow. To show the appetite for consumer goodies, look at the penetration of colour televisions: nearly half of all Chinese households and nearly one third of all Indian ones. In 10 years' time it is perfectly plausible that anyone in China and India who really wants access to a computer will have it.

The question really is what barriers are there to job mobility. In manufacturing there are still considerable barriers in design and marketing, but fewer in production. So most of the big western car groups are setting up manufacturing plants in China, but their design work remains at home.

In services, we simply don't know what is appropriate to export to low-wage countries and what is better to keep in high- wage ones. There is, on the one hand, huge cost pressure to do so, but there are quality dangers on the other. If, for example, the quality of output declines then the risks of annoying customers is so big that the whole process might be undermined. There is nothing so infuriating as talking to someone in a call centre who is speaking with an accent you cannot understand. India, wisely, is putting a great effort into language training.

If there are barriers in front-of-house service jobs, there are fewer ones in the engine room. Indian computer programmers have the reputation not only for being cheaper than their western counterparts, but for being better, too. The trend there can only grow. This will become something big. And that, of course, would be wonderful for India. For us? Well, we had better think of something else to do.

Comments