"DIRECT COMPETITION."  The question that white collar offshoring raises is whether American professionals are more productive than their Chinese or Indian rivals. If the answer is no, the result could be sobering. Many of the highest-skilled jobs that are fleeing offshore seem to depend more on brainpower than on capital or technology -- the last lines of defense in manufacturing. After all, a software programmer with sufficient smarts and education needs only an office, a computer, and plenty of caffeine to do a good job. So if an Indian programmer can produce as much high-quality code as an American one, wage equalization for programmers may occur at a faster pace than it has for apparel workers.


One lesson of today's new variety of offshoring is that "U.S. [white-collar] workers are being put in direct competition with similarly skilled workers around world," says economist Gary Burtless, a colleague of Dickens' at Brookings.

This should be the real worry for Americans who are anxious about the departure of white-collar jobs. At the moment, even with unemployment in the U.S. running at 6% or so, most well-educated Americans still can find a job if they want one. Even taking into account discouraged workers who have dropped out of the labor market would add only another percentage point or two to the official jobless rate.

TWO EFFECTS.  Yet even a reasonably modest loss of white-collar jobs to other countries could disrupt the income and living standards of many more Americans than the tens or hundreds of thousands who end up out of work. Wages are largely set by supply and demand across entire labor markets. As those become more global, two things could happen: First could come displacement -- a U.S. job goes elsewhere. Then could come the secondary effect of a U.S. labor surplus in a variety of highly skilled professions. For example, if enough programmers lose their jobs, it will swell the pool of those looking for such work in the U.S. -- driving down pay throughout the industry.

How can the U.S. avoid that? It can't entirely because globalization has a life of its own. But striving to keep American workers ahead of the pack would help. To achieve that, federal and state governments as well as Corporate America must put a much stronger focus on education and training. The U.S. has been struggling to improve its kindergarten through 12th-grade schooling for years, with only middling success so far. Plenty more needs to be done, especially for smart kids from lower-income families who still often don't get the educational and social support they need to succeed in school.

The U.S. needs to invest more in higher education, too. As the echo baby-boom generation moves through its college years, its numbers are straining the capacity of universities. Yet most states, which provide the education for 80% of all American college students, are cutting back on college spending because of fiscal crises. Unless a way is found to make college more affordable to those who are getting left behind, the U.S. could find itself on the sidelines in the increasingly intense global competition to turn out the best brains.

LOST IMMUNITY.  The full effects of white-collar outsourcing could take a number of years to develop -- and the impact in America could be muted if overseas professionals demand compensation that starts to approach that in the U.S. And given the enduring demand for college-educated employees in the U.S., they're still likely to fare better than less-skilled workers once the economy starts to create more jobs.

Even so, an important lesson of 2004 is this: The immunity from global competition that U.S. white-collar employees have enjoyed for so long has started to vanish.

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