I had a chat with a firm the other day that was resisting outsourcing and going to keep hiring local staff, on the pretext that managers of the future had always come from within the ranks.
Late last year we blogged about the possible trend to bring the jobs back home as a result of changes in the Australian political climate.
This brings us to an interesting article recently noting the issues with bringing the jobs back home in the US. If you take that article and insert “Australian compliance work” into all the relevant places, then you have the likely horror story that keep a lot of Australian accounting firm owners awake at night.
Once the jobs are gone, pretty much nothing is going to bring them back. There have been various studies attempting to allocate responsibility between automation and cheap foreign labour (offshoring or outsourcing).
In December last year the FT noted that most jobs were lost by automation and not by trade (outsourcing). In this article, US factories have gradually been replacing human labour with robots.
In the FT article they noted that losses from trade accountant for 13% of overall job losses, while losses due to automation are around 85%.
The Boston Consulting Group has estimated that a human earns around $25 per hour, including benefits, while the equivalent operating cost per hour for a robot is around $8. And this process, as many have pointed out, is irreversible. Once automation has taken hold, it will be more competitive than offshore labour.
Probably more relevant in this whole story is that the loss of skills are simply too hard, too costly and too inefficient to try to rebuild. So once those skills are gone, a lot of the decisions are very expensive or impossible to reverse.
Whilst phase one seems to be sending work overseas to lower cost labour markets, in phase two Automation is certainly going to play a major role in the decimation of Australian compliance work. So while the global market has decimated lower skilled jobs, there is also proof of impact on higher skilled jobs. Possibly once the Australian compliance lower cost work has gone, then as the smh article notes, there is the real risk for highly skilled jobs coming under pressure. At the same time, American management and work ethic in many cases isn’t competitive with what corporations have become used to in Asia.
So what are the take-aways from this:
- Automation is likely to have a far reaching longer term effect on Australian compliance
- Outsourcing and offshoring is only a small part of the puzzle, and will only be a short term impact
- The Australian Accounting managers of the future probably won’t come through the ranks after cutting their teeth on Australian tax compliance work.