The authors are grateful to Will Martin for many useful comments and to an anonymous referee for helpful feedback on an earlier draft of this paper. The views and opinions expressed are solely those of the authors.
Outsourcing and the US Labour Market
Article first published online: 20 FEB 2011
© 2011 Blackwell Publishing Ltd
The World Economy
Volume 34, Issue 2, pages 192–222, February 2011
How to Cite
Ahmed, S. A., Hertel, T. W. and Walmsley, T. L. (2011), Outsourcing and the US Labour Market. World Economy, 34: 192–222. doi: 10.1111/j.1467-9701.2010.01297.x
- Issue published online: 20 FEB 2011
- Article first published online: 20 FEB 2011
There is worldwide concern about the vulnerability of the current labour force to displacement by future imported services. In the USA, some have suggested that as much as one-third of the workforce might be vulnerable to such outsourcing. However, the labour market impacts of this displacement are difficult to assess using purely analytical or statistical approaches. In this paper, simulation methods are used to understand how sensitive the US economy and labour market are to increases in services imports. Specifically, the scenario examined assumes that the share of imported services in total employment increases from 0.8 per cent to 7.25 per cent over a time horizon in which workers are unable to change occupations. In response, it is found that all industries increase their use of imported services and their use of the composite input that is comprised of imported services and tradable labour. With the exception of legal workers, all workers in tradable occupations experience declines in their real wages. Demand for non-tradable occupations labour rises in the industries that expand the most, while demand falls in shrinking industries. The non-tradable occupations that are used intensively in the shrinking industries experience declines in real wages, while the real wages rise for workers in non-tradable occupations used intensively in the expanding industries.