Debate about “offshoring” of service jobs to low-cost countries has reached fever pitch in the past few years, with concern in much of Europe and the US that such developments could be a big source of unemployment.

A report from the McKinsey Global Institute, part of the McKinsey consultancy, says the fears are overblown.

Even though the supply of young people in low-wage economies with good educational qualifications is likely to increase substantially in the next decade, demand for employing them in their own nations in jobs transferred from rich countries is likely to be muted, the report says.

On top of this, many young professionals in the 28 low-wage countries studied by the institute even though they may have university degrees lack the work-related experience and aptitude that foreign companies are looking for.

“A lot of developing countries are churning out new graduates but not giving enough thought to the practical skills they will need if they are to work for multinational companies,” says Diana Farrell, director of the institute.

The report indicates that even though many manufacturing jobs have migrated from rich countries to emerging economies over the past 10 years, due to cost-cutting pressure, the service sector is unlikely to see the same trend.

McKinsey decided to look at employment in offshored services partly because of the much larger proportion of output taken up by services than manufacturing and also because of political concerns about the trend.

“The subject had become such a hot potato that we thought it was worth analysing,” says Ms Farrell.

On the demand side, McKinsey tried to work out the likely requirement for people in service occupations in offshore centres by looking at eight sectors of the global economy: automotive, healthcare, insurance, information technology services, retailing, pharmaceuticals, banking and software.

It also analysed specific types of service jobs within each of these sectors that could theoretically be performed “remotely” in low-cost countries on behalf of consumers and industrial customers in rich countries.

The degree to which individual jobs can be offshored depends on how “customer- facing” they are. In retailing only about 3 per cent of all the jobs in developed regions lend themselves to being transferred to low-wage economies.

But in engineering and finance because many jobs in these fields are done well away from contact with customers the theoretical proportions are much higher, at 52 per cent and 31 per cent respectively.

On the supply side, there is no doubt about the large number of potentially suitable candidates for service jobs done “remotely” in low-wage nations.

The study says there are 33m “young professionals” with degrees and up to seven years' work experience in fields such as engineering, finance and information technology in the 28 countries it looked at. The number compares with just 15m in the rich countries the institute studied, which include the US, Germany, Japan, UK, Australia, Canada, Ireland and South Korea.

Moreover, the number of young people with professional qualifications in emerging economies is expanding at 5.5 per cent a year five times the figure for the developed world.

But the report scorns the idea that young people in this category in emerging economies can just walk into a job with a multinational employer. Many are judged unsuitable because they may be in parts of the country away from big airports or “offshoring centres”.

Sometimes, too, steady demand in specific locations parts of India for instance for service professionals employed in a previous wave of “offshoring” has driven up their wages, making them no longer so attractive for a foreign employer .

The study says that in service support jobs covering fields such as administration only 2 per cent of all the notionally qualified people in the emerging economies will find work in multinationals in 2008.

In analyst jobs and finance, the comparable figures are 3 per cent and 5 per cent respectively. However, the proportion is much higher in engineering, where it reaches 63 per cent.