Both trade and technology shocks have had large effects on labour markets and the distribution of earnings. It has been found that computerization and technological change in the 1980s and 1990s replaced human labour at tasks that are mostly routine in nature—tasks that are typically performed by workers located in the middle of the wage distribution. The latest digital revolution and the increasing robotization of workplaces may not only affect workers in routine tasks, but also workers in manual and abstract tasks located at the bottom and top of the wage distribution. In addition, recent decades have seen a dramatic increase in international trade, with diverse effects on different groups of workers. While some saw their jobs being outsourced to countries with lower labour costs, others benefitted from increased market opportunities in exporting industries.
1. Jobs versus workers
At the same time that technological innovation and trade have eliminated some jobs, they have helped create new types of jobs and expand other existing ones. However, it remains an important question what happens to the individual workers whose jobs have been lost because of technological or trade shocks.
Current and past research uses administrative and longitudinal data to contrast the effects of technology and trade shocks on jobs and workers. Do workers whose jobs have been eliminated because of these shocks become unemployed, or do they move down the occupational and firm ladder and switch to lower paying jobs? Alternatively, are they successful at moving up the job ladder even in the face of these shocks? Do these margins of adjustment vary across countries and are they shaped by labour market institutions, such as the presence of unions or apprenticeship programmes?
2. Trade, industry structures, and labour markets
In simple trade models, trade and immigration are two sides of the same coin – one the flow of goods and the other the flow of people. While the effects of immigration have attracted research attention since at least the 1980s, the potential negative effects of trade shocks on labour markets have only caught the attention of researchers relatively recently. Here a particular focus has been the impact of trade with China for the US labour market.
Current and past research addresses the effects trade has on labour markets and industry structures, carefully taking account of interdependencies between industries and along firms’ supply chains. The effects of trade on employment and wages of native workers are complex, due to the interaction of export and import shocks and impacts along the entire production chain. CReAM’s research in this area has a special focus on Germany, a strongly export-oriented economy, which has been hit by trade shocks and trade opportunities not just from China, but also from the emerging economies of Eastern and Central Europe.
CReAM researchers publish their findings on this and other topics in top peer-reviewed journals. Click here to see our published research.