Forget AI: offshoring is the real threat to Australian jobs

Australians are constantly being told to fear artificial intelligence, with almost every discussion about the future of work eventually turning to predictions about AI replacing employees, eliminating professions and fundamentally reshaping the labour market. While AI will undoubtedly transform the way we work, I believe our obsession with the futuristic threat of machines replacing people is distracting us from a much more immediate change that is already gathering pace across Australian workplaces.

The greatest immediate threat to many Australian jobs isn't necessarily artificial intelligence; it is a skilled person sitting in another country who can increasingly perform the same role, use the same systems, attend the same meetings and communicate with the same customers for a fraction of the cost.

Offshoring has changed enormously over the past decade and the outdated image of large corporations sending basic call-centre work overseas no longer reflects what is happening. Australian businesses can now build sophisticated international teams containing accountants, software developers, executive assistants, marketers, graphic designers, customer-service specialists, recruiters, payroll staff, sales-support teams and IT professionals who can operate as integrated members of the organisation.

They can attend meetings through video conferencing, work inside the same cloud platforms, communicate directly with Australian customers and collaborate with locally based employees throughout the working day. Improvements in technology have made international teams considerably easier to establish and manage, and the commercial implications of this change are becoming impossible for Australian businesses to ignore.

The economics are becoming impossible to ignore

Running a business in Australia has become extraordinarily expensive because the cost of employing someone extends well beyond their salary. Businesses also face superannuation, workers' compensation, leave entitlements, recruitment expenses, equipment, technology, office space, utilities, insurance, training, management overheads and, where applicable, payroll tax.

At the same time, customers remain extremely price sensitive and many businesses are finding it increasingly difficult to pass their rising costs on to consumers. Employees understandably need wages that allow them to meet their own rising living expenses, while business owners are simultaneously confronting increasing rent, energy, insurance, financing and compliance costs, leaving many caught between protecting their workforce and protecting the viability of the business itself.

Depending on the role, country and structure involved, moving appropriate functions offshore can potentially reduce overall operating costs by as much as 60 per cent, and the competitive consequences of savings of that magnitude are enormous. A company operating with a substantially lower cost base can potentially reduce prices, increase its marketing, invest in technology, expand more rapidly or simply withstand difficult economic conditions for longer than a competitor carrying significantly higher employment and operating costs.

Once one company within an industry establishes an effective offshore workforce and gains a significant cost advantage, its competitors inevitably have to consider how they will respond. This is why offshoring should no longer be regarded simply as an operational decision made by individual businesses; it is becoming a much broader structural change in the Australian employment market.

If your job can be done from a laptop, you are increasingly competing globally

There is an uncomfortable question every Australian white-collar worker should consider, which is whether their job genuinely needs to be performed in Australia.

If somebody can perform their entire role using a laptop, internet connection and cloud-based systems, there is a growing possibility that another suitably qualified person could perform much of that work from Manila, Kuala Lumpur, Jakarta, Fiji or another international location. This does not mean every Australian job capable of being performed remotely is going to disappear, but it does mean Australian workers are increasingly participating in a global labour market whether they recognise it or not.

Geography once provided Australian workers with a considerable degree of protection because when a Melbourne company needed an accountant, administrator, marketing employee or customer-service specialist, it generally recruited someone who lived within reasonable commuting distance of Melbourne. Technology has progressively dismantled that geographical barrier, with video conferencing, cloud computing, cybersecurity platforms, online project-management tools and digital workforce systems making it possible to manage somebody thousands of kilometres away almost as easily as somebody working from home in another Australian suburb.

The widespread adoption of remote working also demonstrated to businesses that many roles did not require employees to be physically sitting inside an office every day. One of the unintended consequences of that transformation is that employers have also discovered that if the work can be performed effectively outside the office, the person performing it does not necessarily need to be located in Australia.

The human factor could make offshoring more powerful than AI

The intense focus on AI also overlooks another important reality about consumer behaviour, because despite extraordinary advances in automation, people still frequently want to deal with other people when they have complicated questions, complaints or urgent problems.

Many consumers are already frustrated by automated menus, chatbots and systems that repeatedly send them in circles without resolving the issue they originally contacted the business about. What they often want is a capable human being who listens carefully, understands the problem and has sufficient knowledge and authority to solve it.

This is where offshoring becomes particularly powerful because it can allow a business to preserve human interaction while dramatically changing the economics of delivering that service. Instead of replacing a customer-service employee entirely with artificial intelligence, a business may employ a skilled person overseas who uses AI to work more efficiently, manage more customers and deliver greater output at a considerably lower overall cost.

The future workforce disruption may therefore not involve AI replacing every human employee, as some of the more dramatic predictions suggest. It may instead involve skilled offshore employees using artificial intelligence alongside their professional capabilities, potentially creating a significant productivity and cost advantage over businesses relying exclusively on higher-cost local workforces.

Australian employees could therefore find themselves competing not simply against technology, but against technology-enabled workers from around the world.

Business owners are responding to commercial pressure

It would be easy to portray businesses that move roles offshore as companies simply looking for cheaper workers, but that interpretation ignores the commercial pressures confronting many Australian employers.

Most business owners I speak with are not looking at their workforce and searching for people they can replace; they are examining their accounts and trying to determine how they can keep their businesses viable, remain competitive and protect organisations they may have spent decades building.

When wages, superannuation, insurance, rent, energy, interest costs, technology expenses, compliance requirements and other overheads continue increasing while customers resist price increases, businesses have a finite number of options available to them. They can absorb those additional costs and accept lower margins, increase their prices and risk losing customers, automate certain functions, leave positions vacant, restructure their operations or investigate whether some work can be undertaken more economically elsewhere.

For a growing number of businesses, the future decision may therefore not be a straightforward choice between employing an Australian worker and employing somebody overseas. The real choice may be between engaging someone offshore, leaving the role unfilled or potentially reaching a point where parts of the business are no longer commercially sustainable.

That distinction is important because Australia cannot have a meaningful debate about offshoring without acknowledging why businesses are considering it in the first place.

Australian workers need to rethink what makes them valuable

None of this means Australia's employment future is hopeless, but it does mean Australian workers need to think much more carefully about what makes their contribution difficult to replace in an increasingly global labour market.

Simply completing routine tasks may become less valuable when those tasks can be automated, performed overseas or completed by offshore employees using increasingly sophisticated technology. The qualities that are likely to become more important are those that are harder to commoditise across an international workforce, including local knowledge, strategic thinking, leadership, creativity, specialist expertise, commercial judgement, relationship management and the ability to understand and solve complicated problems.

Australian workers therefore need to move beyond asking whether somebody else could technically perform their job and start thinking about the value they bring that makes an employer specifically want them to perform it. This is a much more challenging question, but it will become increasingly important as businesses gain access to larger international talent pools.

Employers also have a responsibility to think strategically rather than viewing offshoring purely as a cost-cutting exercise. Moving work overseas without appropriate systems, security, management, quality control and understanding of the work being transferred can create significant problems, and lower labour costs alone do not automatically produce better business outcomes.

Australia needs an honest national conversation

Australia needs to stop treating offshoring as a fringe business practice and start recognising it as part of a much larger conversation about productivity, employment and our international competitiveness.

We cannot continually increase the cost and complexity of employing people locally while assuming businesses will never investigate international alternatives, particularly when technological developments have made those alternatives easier to access than at any previous point.

The challenge for governments, industry and workers is determining how Australia maintains good wages and employment conditions while ensuring local businesses remain globally competitive. We need to consider how productivity can be improved, how businesses can be encouraged to continue creating Australian jobs and how workers can prepare for a labour market in which their competition may no longer live in the same city, state or even country.

These questions deserve considerably more attention because they go to the heart of Australia's future workforce and economic competitiveness. AI generates dramatic headlines because the idea of machines replacing people captures the imagination, but while we debate what artificial intelligence might do to Australian employment over the next five or ten years, businesses are already discovering what global workforces can do today.

Offshoring can create enormous opportunities for Australian businesses by reducing costs, addressing skills shortages, increasing flexibility and helping companies remain viable during difficult economic conditions. At the same time, we should not pretend there isn't another side to that equation, because the very thing capable of helping Australian businesses remain competitive may also place increasing pressure on Australian jobs.

The uncomfortable reality Australia needs to confront is that the greatest immediate competitor for many Australian workers may not be a robot, algorithm or chatbot at all, but another highly capable human being sitting thousands of kilometres away, connected to exactly the same global workplace.