trade, technology and the rise of non-routine jobs
TRANSCRIPT
Trade, Technology and the Rise of Non-Routine Jobs
Trade, Technology and the Rise of Non-RoutineJobs
Gaaitzen de Vries(based on joint work with Laurie Reijnders)
Groningen Growth and Development Center, University of GroningenResearch Center for Global Value Chains, University of International Business and Economics
Global Value-Chain Training and Research Workshop, August 2017
Trade, Technology and the Rise of Non-Routine Jobs
Introduction
Fostered by revolutionary advances in ICT, production processes havebeen unbundled across national borders (Baldwin, 2016)
1. Offshoring of tasks that can be summarized in set of well-specifiedrules and no need for face-to-face contact (Levy and Murnane 2004;Blinder 2009)
2. Computers and robots displacing labor in performing routine andnon-cognitive tasks (Autor et al. 2003)
I What are the employment structure changes in routine andnon-routine jobs?
I How to disentangle the role of trade and technology in drivingemployment changes?
Trade, Technology and the Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
Occupations database
I Employment data from Annual Labour Force Surveys andPopulation Censuses
I Countries covered are the 27 members of the EU (per January 2007)plus Australia, Brazil, Canada, China, India, Indonesia, Japan,Mexico, Russia, South Korea, Taiwan, Turkey and the US
I National occupation classifications mapped to a commonharmonized occupation classification
I Country-industry-occupation-year specific employment shares thatmatch with the countries and industries distinguished in the WorldInput-Output Database (Timmer et al. 2015)
Trade, Technology and the Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
Classification of occupations
Trade, Technology and the Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
Note: Change in the employment share of non-routine jobs between 1999 and 2007
Trade, Technology and the Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
What accounts for these changes in the job structure?
I Two key explanations, both based on an examination of the type oftasks workers perform
(1) Routine-biased technological change
(2) Routine task relocation to low-cost destinations
A word of caution: No single cause or explanation can fully account forthe diversity in country experiences. Many other factors are also relevant,such as minimum wages, occupational licensing, labor unions, andbusiness cycles
Trade, Technology and the Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
Routine-biased technological change (Autor et al. 2003)
I Many occupations, such as bookkeeping, administrative support andfactory jobs, are relatively routine-task intensive
I A task can be computerized when we know the rules: well-specifiedprocedures, such as copying, calculating, and measuring
I So: spreadsheets replace bookkeepers; robots replace factory workers
Trade, Technology and the Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
Routine-biased technological change (Autor et al. 2003)
I ‘Knowing the rules’ is not a trivial requirement. Procedures foraccomplishing many commonplace tasks not explicitly understood(Polanyi’s paradox)
I Two broad categories of tasks for which we do not know the rules:
(1) Abstract tasks: Requires mental flexibility, problem-solving, andcreativity, such as teachers, doctors, managers, scientists, lawyers,engineers, and artists
(2) Manual tasks: Requires physical adaptability or interpersonalinteractions, such as janitors, security guards, construction workers,home health aides
I A more nuanced view on technological change: from skill-biased toroutine-biased technological change
Trade, Technology and the Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
Offshoring
I When we know the rules of a task it can also be off-shored to acheaper location without a substantial deterioration in quality(Baldwin 2016)
I Relocation of routine-task intensive occupations, such asbookkeeping, administrative support and factory jobs
I Design and innovation is kept at home, while personal servicesoccupations are difficult to offshore since they require physicalpresence
Trade, Technology and the Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
Open questions
I Determining the role of task relocation and technological change inaccounting for job polarization is ultimately an empirical question
Trade, Technology and the Rise of Non-Routine Jobs
The Rise of Non-Routine Jobs
What accounts for the rise of non-routine jobs?
We provide new evidence on the role of technological change andproduction relocation.
I Advanced and emerging countries are linked through Global SupplyChains.
I We can determine for each GSC and each occupation:I changes in demand (GSC technology)I changes in the distribution across countries (relocation)I other factors
Trade, Technology and the Rise of Non-Routine Jobs
Intuition of methodology
Intuition: Harmonized occupations data
Trade, Technology and the Rise of Non-Routine Jobs
Intuition of methodology
Intuition: Technological change
Trade, Technology and the Rise of Non-Routine Jobs
Intuition of methodology
Intuition: Task relocation
Trade, Technology and the Rise of Non-Routine Jobs
Task-based model of production in Global Supply Chains
Task-based model of production
I Production function of GSC v :
Yv = Fv (T1v , . . .Tjv , . . . ,TJv )
If tasks are perfect complements then Tjv = αjvYv .
I Task division across countries:
Tjv =∑c
T cjv
I Production function of task j in country c :
T cjv = AcGjv (K c
jv ,Ncjv )
Trade, Technology and the Rise of Non-Routine Jobs
Task-based model of production in Global Supply Chains
GSC technology
Three types of ‘technology’:
(i) Total Factor Productivity (TFP) in a country Ac
(ii) Overall production function for a supply chain Fv
(iii) Task production functions for a supply chain Gjv
We refer to (ii) and (iii) together as ‘GSC technology’.
Trade, Technology and the Rise of Non-Routine Jobs
Task-based model of production in Global Supply Chains
Occupational labour demand
If tasks coincide with occupations then Ncjv is the demand for occupation
j in country c by GSC v .
This corresponds to AcNcjv efficiency units of labour.
If capital and labour are perfect complements in task production theneffective labour demand per unit of task output is the same acrosscountries:
AcNcjv
T cjv
= ejv ⇒ Ncjv =
1
AcejvT
cjv
Trade, Technology and the Rise of Non-Routine Jobs
Decomposition of changes in occupational employment
Decomposition
Ncjv =
Ncjv
pvYv
pvYv
WW
(1) within: occupational labour per dollar of output Ncjv/[pvYv ]
(2) between: GSC share pvYv/W
(3) income: world income W , where W =∑
v pvYv
Trade, Technology and the Rise of Non-Routine Jobs
Decomposition of changes in occupational employment
Further decomposition of within component
Ncjv
pvYv=
1
Ac
ejvTjv
pvYv
T cjv
Tjv
(1a) TFP: Total Factor Productivity Ac
(1b) GSC technology : occupational efficiency units per dollar of output
ejvTjv
pvYv=
ejvαjv
pv=
∑c
AcNcjv
pvYv
(1c) Location: task share
T cjv
Tjv=
AcNcjv∑
c′ Ac′Nc′
jv
Trade, Technology and the Rise of Non-Routine Jobs
Decomposition of changes in occupational employment
Decomposition
Trade, Technology and the Rise of Non-Routine Jobs
Data sources
Global Supply Chain data
Global Supply Chain data
The World Input-Output Database covers 35 industries and 41 countries(including ‘the rest of the world’)
I World Input-Output Tables: interindustry flows, final demand andgross output by country-industry
I Socio-Economic Accounts: number of persons employed bycountry-industry
We restrict attention to the time period 1999-2007 and use tables inprevious year prices.
Trade, Technology and the Rise of Non-Routine Jobs
Data sources
Global Supply Chain data
Global Supply Chain data
Empirical definition of a Global Supply Chain: country-industry where thefinal stage of production takes place.
We determine the number of workers employed in every country-industryworldwide on behalf of each GSC.
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
World Input-Output Database (www.wiod.org)
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
What is in World Input-Output Tables?
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
What is in World Input-Output Tables?
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
What is in World Input-Output Tables?
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
Including satellite accounts
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
A Global Supply Chain in a WIOT
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
A Global Supply Chain in a WIOT
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
A Global Supply Chain in a WIOT
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
A Global Supply Chain in a WIOT
Trade, Technology and the Rise of Non-Routine Jobs
A Global Supply Chain Perspective
I Over-simplified example!
I Essentially, however, US consumption of cars imported fromGermany generates jobs and income for workers in Germany, Chinaand the USA
I We use the input-output technique from Timmer et al. (2014) tomeasure the direct and indirect jobs related to the production of afinal product
Trade, Technology and the Rise of Non-Routine Jobs
Empirical results
Example: German cars (=cars finalized in Germany)
Note: Employment in thousands of jobs. Illustration shows results for 4/11 occupations and for 3/40 countries.
Trade, Technology and the Rise of Non-Routine Jobs
Empirical results
Decomposition
Trade, Technology and the Rise of Non-Routine Jobs
Empirical results
Decomposition results: German cars
Note: Employment in thousands of jobs.
Trade, Technology and the Rise of Non-Routine Jobs
Empirical results
Country-level results
Requires summing decomposition results over all 1435 (41*35) GSCs inour data
Trade, Technology and the Rise of Non-Routine Jobs
Empirical results
Country-level results: the role of trade and technology
Note: Change in the employment share of non-routine jobs due to trade and
technology between 1999 and 2007
Trade, Technology and the Rise of Non-Routine Jobs
Concluding remarks
Concluding remarks
I Technological change drives demand for non-routine jobs inadvanced and emerging countries.
I Needs to be recognized and prioritized by policy makers:I Education and job training system to prepare humans with skills that
are complemented by rather than substituted for technologicalchange
I Life long learning and retraining currently much more commonamong high-educated compared to mid-educated. That shouldchange
Trade, Technology and the Rise of Non-Routine Jobs
Concluding remarks
References
Introducing the GVC method:- Timmer, M. P., A. A. Erumban, B. Los, R. Stehrer, and G. J. de Vries(2014). Slicing Up Global Value Chains. Journal of EconomicPerspectives, 28(2), 99-118.
Analysis based on exports:- Los, B., M. P. Timmer, and G. J. de Vries (2015). How important areexports for job growth in China? A demand side analysis. Journal ofComparative Economics, 43(1), 19-32.
Comparison of different methods:- Los, B., and M. P. Timmer (2015). Appendix - Analysis of GlobalProduction Networks: Approaches, Concepts and Data. In J. Amador,and F. di Mauro (Eds.), The Age of Global Value Chains: Maps andPolicy Issues (pp. 201-208). London: CEPR Press.