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Future globalisation of service sector and jobs

This video discusses the future of globalisation and its consequences on service sectors.
In this video, we’ll look at the future of globalisation and its implications for jobs. I’d like to start with the most important point, the really new thing about the future of globalisation. The future globalisation will affect service workers more than factory workers. This is a big change. Until recently, globalisation was mostly about factories and manufacturing. Sectors where workers made things that could be put on a ship and sold abroad. This sector is where most of the pains and most of the gains of globalisation were felt– most directly at least. Most people directly affected by globalisation were those who worked in factories. By contrast, service and professional jobs were largely sheltered from globalisation. And there’s a very simple reason for this.
For many service sector and professional jobs, the service provider and the service buyer have to be in the same place at the same time, often in the same room. Now since the costs of getting sellers and buyers of services face to face in the same room is very high, there was, in fact, very little international trade in most services. In other words, the high cost of face to face interactions is what protected most service sector jobs from globalisation. Globalisation was an issue for people who made things. They had to compete with goods shipped in containers from China. But few services fit into containers, so most middle class jobs faced little foreign competition. Of course, this doesn’t apply to all services.
There is a lot of trade in some business services– like architectural services, banking, and insurance services, and of course, transportation services. But this brings me to my second really big point. Most people in the rich nations work in services. Let’s look at some facts, taking the US as an example. Most Americans work in the service sector, as the chart shows, only about 10% of American workers are involved in sectors that produce traded goods– things like manufacturing, construction, farming, and the like. The rest work in service sectors of various types– office and administration support is the largest segment, but professionals like law, medicine, architecture, engineering, and so on account for about 20% of the jobs.
The other point here is that most of these people have been shielded from Globalisation, but many of them won’t be shielded in the future. Foreign freelancers will be able to do many of these jobs, or at least help with doing some of these jobs. One way to phrase it is to call these new workers tele-migrants, since they’ll be working alongside us, in our offices, and our workplaces. Now this has been going on for a long time in certain services, like web development or IT services. If you wanted a website developed, one of the best ways to do it was to get it done by somebody who was telecommuting, talking with you on Skype, but based in India.
But I believe that this will soon become very mainstream and affect a much wider range of jobs, due to the advancement of digital technology. I think we’ll start to see tele-migrants in our offices and workplaces. I think in the next few years, this will become commonplace. In fact, if you think about it, I’m tele-migrating right now. Since you almost surely are in a different nation than I am, and since you are working at learning, and I’m working at teaching, we could say that I’m telecommuting into your nation.
Now before the wonders of digital technology, I would have had to physically come to your nation so we could be face to face and I could be teaching you in the same room. In fact, that’s the way I still teach today in the Graduate Institute. The next big thing I want to talk about is how the range of jobs where this sort of tele-migration is possible is expanding. And this is thanks to four key developments. The first one is the rise of remote work. Many people in Europe and North America have switched to telecommuting to work. For many, this is a part time thing, say working one day from home for a week.
But for many, especially younger workers, they’re working remotely as a way of life. A second stage of this remote work is freelancing, and this means people aren’t working for a single company, they’re working on particular jobs or participating in particular projects instead of being a full time employee. Now this is very popular. A recent Pew poll in the United States has found that 47% of workers had done remote work in the last year, and 27% of them worked offsite regularly. In other words, they were telecommuting from their home or coffee shop to the office. Now this is especially common among young people with university degrees.
A recent McKinsey study, for example, found that 94 million people in the EU were engaged in this sort of independent work in one form or another. Now to date, these freelancers and remote workers are mostly working with their own nations. So it will be somebody who is sitting in Lausanne but working in Geneva, or sitting in Sussex and working in London. But it doesn’t take a lot of imagination to think that this freelancing could go global. And given the very large wage differences, the very large wage rates we saw in previous steps, there is a big profit motive for doing so. It is much cheaper to hire people from abroad. Let me just give you a small example.
About 10 days ago, I hired two copy editors from an online platform called Upwork. As one of my other jobs, I run a website called VoxEU, which does policy based analysis and commentary by leading economists. And to do this, we need lots of copyediting. So when we needed new copyeditors, I went online, and I hired one who’s sitting in Bangkok, and the other one who sits in Battle Creek, Michigan, USA. Now both of them, especially the one in Bangkok, is much cheaper than the ones I could have hired in London.
So in some sense, I’m allowing these people to telecommute into the offices, and I’m doing it because it’s just much cheaper– we’re saving the website for a lot of money. So this is the next factor that’s accelerating freelancing and the future of Globalisation. That’s the rise of freelancing online platforms. The internationalisation of freelancing is being accelerated by these platforms. Now, you can think of these as like the eBay of freelance work, or Tinder if that’s you’re sort of thing. Basically, these platforms are matchmakers between freelancers who want to work on projects, and people who want these projects done by freelancers.
So the largest of these new international matchmaking platforms is called Upwork– that’s what I used– but there are plenty of competition. Now you can see in this slide five of the most popular ones– Up work, as I said, Freelancer is an Australian one, Amazon MTurk– Mechanical Turk– is an American one, Fiverr is a British one, and Witmark a Chinese one with millions and millions of freelancers online. Now the position of these things is, in essence, people who have something to sell– which is services– and people who want to buy things– which is services.
And the platforms connecting, taking care of all the problems of international payments, all the problems of if they’re actually working, guarantees to the freelancers of their get paid, guarantees to the hirers that the work will be good enough, et cetera. The third factor of the four that are accelerating future Globalisation is the most revolutionary of all– it’s machine translation. This is truly amazing. As it turns out, computers can translate spoken and written language instantaneously and for free. This is not science fiction, it’s happening right now. Let me give you a little demonstration. What I’m going to do is open up the Spanish Wikipedia page for international trade, or Comercio Internacional, to put it my bad Spanish.
Now what I’m going to do is fire up Google translate on my iPhone here. And what I do is I just take a picture of the page, and then I highlight it, the sentence I want translated with my hand here, and just go breast. Now there we have the translation into the two languages, and you could look at it. But what’s interesting is it can also read it. So let me have it read what it understood as the original Spanish. Here’s how it goes. [NON-ENGLISH SPEECH]
Now let me know in the comments if that Spanish is good. But here’s the English translation, which happened instantaneously. International trade, foreign trade. Global trade is defined as the movement of goods and services through different countries and their markets. OK, so that’s English. And I think you can see that that’s pretty revolutionary. Instantly free, has translated relatively difficult text. Now the trouble with that is it’s a little bit slow. You could see using it on a web page or translating documents. But one of the other things, which is really amazing, is that it’s live and free. Let me give you another demonstration of this. Hey, Siri.
How do you say in French, trade is what happens when goods cross borders between countries?
In French, trade is what happens when goods cross borders between countries is, [FRENCH SPEECH] So I speak French reasonably well, and I think that was pretty good. And I can see the cameramen, who are native French speakers, they’re nodding their heads that it worked out pretty well. Now I think that’s really, truly amazing. That could change many, many things. Many of you will have travelled and realise what a barrier is language to everything we do, including Globalisation. In particular, the idea that it could go somewhere and work, or work online, is often hindered by translation. These big advances happened last year. In 2016 is when it got really good. This year, it’s getting even better.
Next year it will be even better. At this explosive pace of digital technology, machine translation is bringing down one of the most enormous barriers to trade in services. So that’s the third factor– machine translation. The fourth factor is the rapid advancement of telecommunications. Now we’ve already looked at this, focusing on telepresence. But it’s worth remembering that telecommunication technologies are improving as fast as the other digital technologies. The most amazing advances in TelePresence and TelePresence robotics are one thing. There’s also these advances in augmented reality, which allows people to share a screen when one is far away and the other one right here. It’s a little bit like Pokemon Go but applied to work.
Now these new technologies are making it much easier to work side by side with people who are actually on the other side of the world, or it is somewhere else. So I’ll just leave you with this photo of these advanced communication techniques, which is the fourth. So these four developments is exactly why I think the future of Globalisation is coming faster than most people expect, and that it will hit service workers much more than factory workers.
In the beginning, it will take off slowly. But as people get used to it, and people get used to slotting in foreign workers, I think the whole thing will accelerate.
Future globalisation will affect more service workers than factory workers.
In this video, let’s look at the reasons for this.
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International Affairs: Globalisation

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