The remote revolution could lead to

offshoring Armageddon
Globalization crushed blue-collar jobs throughout the Rust Belt. Now some
urban professionals could be poised for a similar fate.

Analysis by Andrew Van Dam

Workers leave after their shift at a U.S. Steel plant in Youngstown, Ohio. (Keystone-France/Keystone-
France/Gamma-Keystone/Getty Images)

When offshoring methodically disemboweled the Rust Belt, white-collar Americans thrived,
free to enjoy the spoils of globalization safe in the knowledge that their jobs could not be
outsourced easily to cheap foreign rivals. Now, some economists say the remote-work
revolution may have changed that almost overnight.
“If you can do your job from home, be scared. Be very scared,” Richard Baldwin, an
economist at the Graduate Institute in Geneva, said in a recent video. “Because
somebody in India … or wherever is willing to do it for much less.”
By greatly accelerating the adoption of remote work, the coronavirus pandemic has
created a feedback loop that could be the most disruptive force to hit the job market since
the blue-collar apocalypse in the 2000s, known among economists as the China shock.
The rise of China as the world’s factory lifted hundreds of millions of people out of poverty
worldwide and deluged consumers with cheap goods. But it also devastated local
manufacturing economies in such places as Hickory, N.C., Tupelo, Miss., and Springfield,
Mo., and sparked a backlash that ultimately would help carry Donald Trump to the Oval
Office.
There’s no telling whether the remote revolution will cause similar social upheaval. Many
economists are optimistic that American workers will land on their feet amid a gradual
transition from a world in which they compete with a few dozen locals for each new job to
one in which they compete with a few million professionals worldwide. But economists
were optimistic about Y2K-era globalization as well, and it seems wise to keep a wary eye
on the possible downside.
We’ve chronicled how remote work is reshaping America, but there’s been less focus on
how the remote-work boom has removed one of the biggest barriers to outsourcing for
small businesses. As the pandemic forced them to go digital and become adept at
managing a distributed workforce, some bosses consider outsourcing to be the logical
next step — especially as wages soar and workers remain scarce.
Companies already are turning increasingly to contractors vs. full-time employees.
Relative to workforce size, the number of contractor payments in the United States
skyrocketed 56 percent from 2019 to earlier this year, according to data provided
exclusively to The Post by the payroll and benefits firm Gusto. By June, the 200,000-plus
businesses on Gusto’s platform averaged almost two contractor payments for every
employee they had on the payroll. In some industries, it’s even higher.
“The pandemic became a very volatile time, and lots of businesses needed to pivot on
very quick timelines,” said Liz Wilke, principal economist at Gusto. “And they also needed
skills and capabilities that they didn’t have before or could not get in the talent market. And
that is the primary advantage of contractors.”
Brian Zielinski is riding square atop the outsourcing wave. He co-founded and runs
ShapeConnect, which matches companies with vendors who can help outsource or
automate certain jobs. They’re doing record business, matching more than 200 American
small and midsize businesses with suppliers in the most recent quarter.
Since the pandemic, Zielinski has seen soaring interest from smaller construction and
manufacturing businesses — companies that might have been doing their customer and
project management on paper or in simple spreadsheets before the pandemic but are now
scrambling to go fully digital.
“I think people are looking for the flexibility now of outsourcing personnel versus hiring,”
Zielinski said. He added that customers are reluctant to commit to full hires given the
shakiness of the economy and the two-plus years of unprecedented uncertainty through
which we’ve all just lived.
Zielinski said ShapeConnect doesn’t work with overseas providers, since most clients
prefer contractors in the United States and Canada who share similar time zones,
language and culture. But economists like Baldwin say those barriers are already breaking
down as rapid technological improvements make it increasingly easier to cross time zones
and language barriers.
“American companies can hire people all over the planet. And they will,” said Mark
Zandi, podcaster and chief economist at Moody’s Analytics. “That’ll become increasingly
more prevalent as technology improves and companies that form optimize around remote
work. They’re not going to form around office cubes; they’re going to form around a
remote work dynamic.”
Convincing businesses to decentralize their technology used to be like pulling teeth, said
Adam Barney, president of Framework IT, a Chicago firm that helps businesses across
the country outsource technology management and move their operations to the cloud.
Many clients clung to offices stuffed with server racks, phone lines and other hardware —
until the pandemic hit.
The transition to a cloud-based, remote-friendly operation is no longer in question. As
clients race to catch up, Framework’s monthly recurring revenue is up 85 percent from
pre-pandemic levels, and order sizes have soared more than 140 percent. Companies of
all sizes are newly comfortable with workers clocking in from anywhere.
“We’re even seeing many organizations actually say, ‘We’re going to be a virtual-first
organization moving forward. We are going to get rid of an office when our lease is up. We
are never going to go back to that,’” Barney said.
Economists we spoke with all believe the white-collar job market will go global, but they
differ greatly on whether the shift will be measured in years or in generations. That
timetable matters: It’s the difference between a gradual transition and “American carnage.”
If we assume the change is imminent, and look at our best estimates of where the most
easily remote-able jobs were just before the pandemic, we see the remote revolution
would be almost the inverse of the China shock, which destroyed the careers of many
less-educated factory workers. As a rule, the more a job pays, the easier it is to do
remotely, according to a Washington Post analysis of Labor Department data on jobs that
had to go remote during the pandemic.
The highest-paying industries, software and internet publishing (including search and
social networking), also have the highest share of remote workers. A similar pattern holds
throughout the income scale, with the lowest-paying jobs — in places such as gas stations
— being least likely to be done remotely.
To understand which areas would suffer most if those jobs went overseas, we analyzed
data from the economists at WFH Research, which allows us to look at all remote-capable
jobs, not just those effected by the pandemic. It also allows us to exclude hybrid jobs,
which presumably will be harder to do from overseas.
In this nightmare scenario, our analysis found that the nation’s richest urban centers would
also be its most vulnerable. Cracks have already appeared in the gilded metropolises of
New York and San Francisco, where the urban cores are losing population as remote and
hybrid workers flee to more affordable and amenable outlying communities. The losses
would compound if those jobs were to go overseas.
And while those jobs are concentrated in urban areas, many of them coastal, no industry
or region would be untouched. As Zielinski points out, even blue-collar industries such as
construction or manufacturing have plenty of white-collar roles that can be outsourced —
think marketing, accounting, finance, sales and IT.
The nation’s white-collar jobs are more spread out than the manufacturing jobs
concentrated in single-industry factory towns that lost everything to China, said the
Massachusetts Institute of Technology’s David Autor, the slide-deck-slinging nerd
superstar who first described the China shock with his collaborators David Dorn and
Gordon Hanson.
And while Autor says he sees parallels between blue-collar workers eviscerated by the
China shock and the white-collar workers who might soon be blindsided by global
competition, he believes this will be more of a “little ripple or a little jolt rather than a
shock,” since white-collar work simply isn’t a commodity that can be easily swapped
across borders.
“If you move machinery between here and China, the machinery more or less works the
same way,” Wilke said, “and that’s not necessarily true of knowledge-based industries. It’s
too soon to tell.”
Indeed.com’s Nick Bunker pointed out that remote work seems to be going more local
than global in the short term, as many “remote” jobs in the United States are quickly
becoming hybrid, with workers coming in a few days each week. A recent Gallup poll
found a sharp increase in hybrid work in 2022, with 49 percent of remote-eligible jobs
being hybrid in June, up from 42 percent in February. In the long run, Gallup estimates,
just 22 percent of remote-eligible jobs will be fully remote, while 55 percent will be hybrid.
Similarly, Barney, the IT firm president, says his clients typically bring up offshore
outsourcing only to make sure he’s not doing it. With rising uncertainty around the
coronavirus and the war in the Ukraine, clients are increasingly interested in cybersecurity
and consider it unacceptably risky to expose critical business functions to the vagaries of
geopolitics.
Autor, Zandi and other economists say those full-remote jobs could ultimately be a
positive for American white-collar workers, liberating them from high-cost urban areas and
revitalizing small communities.
“In global remote labor markets, U.S. workers earn a premium and are more likely to be
hired,” said Adam Ozimek, who has extensively analyzed remote work as chief economist
at Upwork and now the Economic Innovation Group. “Part of it, I believe, is that the U.S. is
the most important consumer market in the world, and accessing workers who understand
this market best is incredibly valuable.”
In areas beyond the reach of the U.S. market, though, economists are less confident that
American workers will steal jobs from their more-affordable overseas peers.
“I don’t see highly talented U.S. workers competing for jobs in France or Singapore,
unfortunately, because Americans are so resolutely monolingual. French and Singaporean
workers will benefit more from remote access to U.S. jobs than will U.S. workers to remote
access to jobs in Europe or Asia,” MIT’s Autor told us.
The China shock devastated such places as Dalton, Ga., in part because a high school-
educated carpet factory worker had few other options once the biggest employer in the
only hometown she’d ever known had closed down.
But white-collar workers who lose remote jobs to global competition will find themselves
with more options, Ozimek and other economists said. Educated workers are already
better at landing on their feet in the United States — they’re more mobile and more
marketable. And the new remote-work market will make it even easier, allowing them to
apply for jobs throughout the country.
Of course, that may do little good if we rapidly reach a place where most white-collar jobs
can be done more cheaply overseas.
In the near term, there’s little evidence to suggest a sudden exodus of jobs offshore. In
fact, companies have been moving blue-collar jobs back to the United States. But
Baldwin, author of a recent book on the globalized and automated future of work, says
there are already pockets of white-collar offshoring, and they could expand rapidly once
technological advances wipe away linguistic and logistical barriers, since bits and bytes
move freely and instantly across borders.
Stanford economist and remote-work prophet Nicholas Bloom said any wave of white-
collar outsourcing in the service sector wouldn’t begin until the pandemic has abated and
executives can freely travel abroad once more.
“Right now, that’s not so easy to do as if you want to outsource to say, Mexico. You need
to take a few trips there first to scope the place out,” Bloom said. “But give it two or three
years and we will be looking back at 2020 as the turning point for service-sector
globalization.”