The paper highlighted this week looks at an issue shaping political debate across the developed world. What effect has China (and by implication other developing nations) had on employment patterns in the West?
Wolfgang Keller and Hâle Utar of the universities of Colorado and Bielefeld respectively studied employment patterns in the textiles and clothing industries in Denmark from 2002 to 2009 after China joined the WTO in 2001 and discovered up to 60% of occupations were affected by ‘job polarization’ of one sort or another. Previous studies in America had suggested around 40% of occupations were affected but in a smaller country where industry is more concentrated the effect appears more dramatic.
The paper contradicts previous studies that conclude trade in aggregate is good for developed economies. The researchers find that for specific industries there is a clear polarization of employment with middle income/talent workers suffering most as they either have to move down or up the skill/salary ladder into more service oriented occupations.
Whilst acknowledging technological change has had an effect on manufacturing jobs the paper shows clearly the effect of trade, especially when it produces a sudden change in the tilt of the playing field, is a significant contributor on its own to labor market disruption. Women seem also to be hit harder than men. A finding that chimes with studies showing women have been slower to benefit from the labor market recovery in the U.S. since the GFC.
With clinical candor the paper concludes (jump to P. 54 if that’s all you have time for) ‘As international economic integration increases, if imports from poor countries continue to hollow out the middle of the wage distribution in rich countries, the implied increase in inequality might affect social cohesion and broader political outcomes in rich countries, and beyond.’ [D’ya think? Ed.]
For those of us trying to make sense of the appeal of a repulsive populist in the U.S. or Little Britain Brexiters in the U.K, the paper is a chilling update on the reality of a more integrated economic system on the poorly prepared in the developed West.
Er, Happy Sunday?