Trade and Offshoring
From VoxEU.
In recent research (Ebenstein, Harrison, McMillan and Phillips
2009), my coauthors and I use new data to confirm that globalisation
forces have had a bigger impact on US wages than previously believed.
We show that while some US workers have been adversely affected by
global competition, others have benefited from these changes. ...
We begin by showing that over the last twenty years, employment in US manufacturing has declined, wage inequality has increased, and the role of international trade has grown. ... For workers without a college degree, there were significant declines in manufacturing employment over the entire period. The opposite was true for workers with a college degree. Within manufacturing, the labour force has become increasingly well educated, as college graduates replaces workers with high school degrees.
[W]e statistically test whether trade and offshoring has forced workers out of the manufacturing sector. We find that there has been a big movement of workers out of sectors with a lot of import competition. We also look for the impact of offshoring on US manufacturing employment, finding small effects on employment that depend on the location of offshore activities. A 10 percentage point increase in offshoring to low-wage countries reduces employment in manufacturing by 0.2% while offshoring to high-wage countries increases employment in manufacturing by 0.8%.
We begin by showing that over the last twenty years, employment in US manufacturing has declined, wage inequality has increased, and the role of international trade has grown. ... For workers without a college degree, there were significant declines in manufacturing employment over the entire period. The opposite was true for workers with a college degree. Within manufacturing, the labour force has become increasingly well educated, as college graduates replaces workers with high school degrees.
[W]e statistically test whether trade and offshoring has forced workers out of the manufacturing sector. We find that there has been a big movement of workers out of sectors with a lot of import competition. We also look for the impact of offshoring on US manufacturing employment, finding small effects on employment that depend on the location of offshore activities. A 10 percentage point increase in offshoring to low-wage countries reduces employment in manufacturing by 0.2% while offshoring to high-wage countries increases employment in manufacturing by 0.8%.
The beneficial effect of offshoring activities in high-income countries by US firms on their home employment is one of the most surprising findings of the study. The surprising positive effect of offshoring to high income countries on US wages is consistent with some new theories developed by Gene Grossman and Esteban Rossi-Hansberg (2008). They argue that offshoring activities can actually increase wages for workers remaining at home by cutting costs for the companies that employ them.
Did the negative effects of international trade and offshoring activities on US wages increase in the 1990s relative to earlier decades? We find that they did, and that the negative impact of offshoring to low-wage countries on both US wages and employment only became important in the 1990s. The wages of older workers appear to have been disproportionately hurt by offshoring activities. ...
We then test for the impact of competition from international trade and offshoring activities on US manufacturing wages. Because the US labour market is very flexible, we argue that most workers can easily move across different industries. Our results show that there is a lot of movement of workers across different industries in response to competition from imports. This means that there is no visible impact of import competition on wages within highly affected industries since those workers may relocate to another industry. However, it is much more difficult to switch occupations. Consequently, we introduce the concept of an occupation-specific measure of offshoring, import competition, and export activity. ...
What we find is that a one percentage point increase in occupation-specific import competition is associated with a 0.25 percentage point decline in real wages. While some occupations have experienced no increase in import competition (such as teachers), import competition in some occupations (such as shoe manufacturing) have increased by as much as 40 percentage points. The contrasting experiences of workers in textiles and apparel-related sectors compared to many service sector employees such as teachers helps to explain why some parts of the US economy have been deeply affected by globalisation while others have not.
We also examine the impact of increased offshoring by US multinational firms on wages of workers in the US. We find that when US companies increase their offshoring activities to low-income countries, this hurts US wages, but that more offshoring to high-income countries is associated with an increase in US wages.
»
- Read original article.
Delicious
Digg
Magnoliacom
Google
Yahoo- 2419 reads