Workforce | Skills

Outsourcing – the job creator

The only thing that creates over 95 per cent of all jobs is outsourcing, IBISWorld and Ruthven Institute Founder and Director, Phil Ruthven AM told a CEDA audience in Sydney.

“We would never have had agriculture if we still grew our own food in the backyard and milked the cows,” he said.

“We would never have had a manufacturing industry if Dad made the furniture and Mum made the clothing or pickled the vegetables to preserve it.”

Speaking at a CEDA event on the topic of Industry 4.0, Mr Ruthven said since 1965 when the industrial age finished, outsourcing of services from homes, companies, and overseas has been the driver of this new age. 

“Outsourcing has created all the jobs in Australia, except for the underlying utilities, for the last 200 years, and will continue to do so for the next 200 years as well,” he said.

“The reversion to sloth has been very important because when you resort to sloth you actually have to get somebody else to do the job for you which means you’re pulling them out of the unemployment pool. 

“Never feel guilty about outsourcing, it’s doing it yourself that you should feel guilty about.  

“Since 1965, just the household outsourcing is over $500 billion. 

“The average family now spends $53,000 per family outsourcing things they used to do themselves in 1964.

“People might be surprised to know that outsourcing services in the form of tourism will be a bigger dollar earner than the whole of mining before the end of the next decade.

 “Never forget that outsourcing is what creates industries, not technologies, technology is what underpins them and helps them to grow very quickly.”

Mr Ruthven said everyone will be affected by Industry 4.0. 

“When it comes to manufacturing, it wouldn’t matter whether you’re making soft drinks or whether you’re making specific blades for a jet engine, you are going to have to use the power of this  Industry 4.0 resource, to be competitive and productive, it’s as simple as that,” he said.

“We often wonder why cabs were so disliked around Australia when Uber came along. 

“At least with Uber you have a map, you know who is coming, when they’re coming, compared to a cab you wouldn’t know if it’s even going to arrive. 

“Modern communications, done properly, can actually wipe you out if you ignore it. 

“To see cabs who thought they had a plate worth $550,000 and are now worth nothing much, is an example of how you can be wiped out if you just don’t see the signs.
“We used to do a special report just on video stores, well you can’t write one now because there’s only two left in Australia from memory, it has all gone over to Netflix or whatever it’s going to be.

“So, the quick and the dead are there, even with the very simple industries, not just the complex and highly skilled ones.”

Mr Ruthven said he worked on a big job for IBM a few years ago on the impact of Industry 4.0.

“They wanted to know how many industries would be wiped out by the hyper digital era, and surprisingly we found very few,” he said.

“I think we only found about nine that would die over the next 10 years, only nine, but the rest were going to be transformed. 

“I mean Uber is transforming the hire car business without wiping out hire cars, they’re simply moving one form of doing it to another. 

“So, it’s not necessarily going to destroy a lot of industries, it’s going to destroy companies that don’t change to a new way of doing things.”

Mr Ruthven said Australia will get back industries like manufacturing, but they won’t employ many people because they’ll be heavily mechanised. 

“I went back to see my factory that I used to run in Bathurst, the Birds Eye factory, when I was running it as manager back in the 1960s it had 700 people, it’s now got 110 and you can hardly see a person in sight it’s so highly mechanised,” he said. 

“So, don’t worry we are going to get our manufacturing sector back but it’s never getting to the 30 per cent again or even 10 per cent.

“This is very important when you look at Western Sydney and Industry 4.0 – what are the winnable and unwinnable wars. 

“Western Sydney has nine per cent of the population of Australia, seven per cent of the GDP so it’s a bit understated in terms of standards of living. 

“And it’s got about 12 per cent of all manufacturing of Australia, so Western Sydney is around one per cent of the total GDP of Australia. 

“That tells you it’s going to have to be highly focussed to be successful. 

“In some cases, it’s going to have to be very sophisticated to take on exports and supply chains overseas. 

“And in other cases, it’s just going to have to be up to world’s best practice to compete.”

Other speakers at this CEDA Sydney event included LA Services General Manager, David Fox; GE Australia Country Leader, Sam Maresh and Western Sydney University Launch Pad Innovation Program, Senior Business Advisor, Inu Rana.

Event presentations

Phil Ruthven AM, Ruthven Institute MP3

Panel discussion MP3