1. Economics
August 22, 2018updated 07 Apr 2022 7:38am

Hong Kong could benefit from offshoring – but only if its government tackles the digital divide

By Gary Lai

“Offshoring” has been a big idea in international trade over the last few years – especially in the United States. That 40m Americans could lose their jobs to other countries should shocking not only to Americans, but also to government’s, like Hong Kong’s, for the largely missed economic opportunities it represents to the city’s poor.

Offshoring is the migration of jobs from (mostly) richer countries to (mostly) poorer countries. As industrialised economies have increasingly moved away from manufacturing, the offshoring debate has increasingly come to focus on services. Two factors behind this are rise of computerisation and telecommunications technologies like the internet, which enabled it; and the entry into the global economy of India and China, which benefited from it.

So what is offshorable? Alan Blinder, the former vice-chairman of the US Federal Reserve Board, makes a distinction between those impersonal services which can be delivered electronically with little to no degradation of quality, and so are tradable and potentially offshorable; and personal services which cannot be delivered electronically, or which suffer severe degradation of quality when delivered in such a way, and are hence non-tradable.

By this definition, keyboard data entry and manuscript editing are offshorable, but surgery is non-tradable. Writing computer code is also an impersonal service that can be delivered electronically with ease, while driving a taxi or lawyering in court cannot. It should be noted that what is offshorable is unrelated to whether the job is low- or high-skilled.

What distinguishes impersonal, or tradable, services from personal ones is that personal services require physical presence or face-to-face contact with end users. Typing services as well as financial security analysis are already being delivered electronically from India. Radiologists should be concerned for their jobs, although most doctors should not. While the police’s work generally isn’t offshorable, the work of security guards, consisting of monitoring cameras, may be.

Offshorable jobs are not, as some have suggested, necessarily confined to rule-based tasks: Blinder pointed out that many complex tasks that require refined skills and human intervention are routinely offshored, with the aid of telecommunication facilities. This includes statistical analysis, programming, editing, and security work.

Finally, what is personal and impersonal exists on a continuum. There are jobs that are obviously on opposite ends of the spectrum: data entry and child care, for example. But there are others in between, and while the job of an architect or professor can be delivered electronically over the internet or videoconferencing, the quality of their service degrades noticeably.

Are Hong Kong’s poor benefitting from offshoring? After all, offshoring is a large and disruptive force in the services sector. Since information and communications technology will continue to get better and cheaper, the scope for offshoring will increase substantially. As a developed economy, Hong Kong has a large services sector.

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But Hong Kong’s digital divide will keep the poor from benefitting from offshoring. Some 98.9 per cent of Hong Kong residents with an income of $50,000 or more have a computer, compared to 72.2 per cent of those who make $10,000 to $19,999 and a meagre 37.9 per cent of those making less than $10,000.

Internet penetration in Hong Kong is among the highest in the world – 92.6 per cent of households have broadband connection and there are 51,914 public Wi-Fi access points in the city, according to this year’s figures. But again, the poor are under-represented. Only 69.3 per cent of residents in public rental housing own computers that are connected to any form of internet. By income, only 36.7 per cent of households with an income of under $10,000 own an internet-enabled computer. In families that make more than $50,000, the penetration rate is 98.6 per cent. Along the age divide, the elderly are also markedly less web-enabled, with only 37.4 per cent knowing how to use the Internet.

The question is whether these figures will prevent Hong Kong, and its urban poor, from benefitting from the offshoring craze. The census data does not give much information on mobile internet usage, although the functions on a cell phone that can be using for offshoring with a business partner overseas, as of now, are somewhat limited. So if Hong Kong is to benefit from offshored jobs, computers will be necessary. And Hong Kong’s urban poor, with their low rate of internet connectivity, will not benefit from the deluge of jobs that could theoretically move from the rich world. 

To change that, the city’s government needs to connect the poor to the internet and 3G and 4G mobile networks: that way, they can take advantage of traditional online methods of connectivity like social media and video telephony, as well as newer services like e-payment. This can be done through subsidies or through the creation of “internet labs” that complement government-organised career training centres and programs.

Plugged into the international economy with these electronic tools, the poor can solicit businesses from abroad in fields like typing, translation, and language tuition. The statistics, after all, shows that a large pool of labour is waiting to be used in an age of global offshoring.

Gary Lai was the founder and director for ten years of the anti-poverty campaign TKO Poverty.

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