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How Trade Hurt Unskilled Workers

In: International Trade and Labour Markets

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  • Adrian Wood

Abstract

This paper will argue for what is still a minority view among economists: that the main cause of the deteriorating situation of unskilled workers in developed countries has been expansion of trade with developing countries.1 This view was advanced in Wood (1991a, b), and later developed into a book (Wood, 1994), but much the same line is taken by Batra (1993) and by Learner (1993, 1994). It has been strongly attacked, however, by economists who think the effects of trade have been small — notably Lawrence and Slaughter (1993) and Krugman and Lawrence (1994). By way of a counterattack, this paper will outline the evidence which suggests that trade is the main cause of the problems of unskilled workers, respond to some criticisms of this evidence, and challenge the evidence for the alternative view that these problems are caused mainly by new technology. At the end, it will consider some of the implications of this debate for public policy.

Suggested Citation

  • Adrian Wood, 1997. "How Trade Hurt Unskilled Workers," Palgrave Macmillan Books, in: Jitendralal Borkakoti & Chris Milner (ed.), International Trade and Labour Markets, chapter 7, pages 140-168, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-14577-5_7
    DOI: 10.1007/978-1-349-14577-5_7
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    References listed on IDEAS

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    1. Borjas, George J & Ramey, Valerie A, 1994. "Time-Series Evidence on the," American Economic Review, American Economic Association, vol. 84(2), pages 10-16, May.
    2. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
    3. Alan B. Krueger, 1993. "How Computers Have Changed the Wage Structure: Evidence from Microdata, 1984–1989," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(1), pages 33-60.
    4. Borjas, George J. & Freeman, Richard B. (ed.), 1992. "Immigration and the Work Force," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226066332, December.
    5. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, vol. 42(1-2), pages 3-31, February.
    6. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Investment, Outsourcing and Relative Wages," NBER Working Papers 5121, National Bureau of Economic Research, Inc.
    7. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1992. "On the Labor Market Effects of Immigration and Trade," NBER Chapters, in: Immigration and the Work Force: Economic Consequences for the United States and Source Areas, pages 213-244, National Bureau of Economic Research, Inc.
    8. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
    9. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 367-397.
    10. Robert Z. Lawrence, 1994. "Trade, Multinationals, & Labor," NBER Working Papers 4836, National Bureau of Economic Research, Inc.
    11. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
    12. Richard B. Freeman, 1994. "Working Under Different Rules," NBER Books, National Bureau of Economic Research, Inc, number free94-1, March.
    13. Robert Z. Lawrence & Matthew J. Slaughter, 1993. "International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2 Microec), pages 161-226.
    14. Machin, Steve, 1994. "Changes in the Relative Demand for Skills in the UK Labour Market," CEPR Discussion Papers 952, C.E.P.R. Discussion Papers.
    15. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-392, June.
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    More about this item

    Keywords

    Labour Market; Skilled Worker; Factor Content; Unskilled Worker; Wage Inequality;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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