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Offshoring, Wages and Job Security of Temporary Workers

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  • Holger Görg
  • Dennis Görlich

Abstract

We investigate the impact of offshoring on individual level wages and unemployment probabilities and pay particular attention to the question of whether workers on temporary contracts are affected differently than workers on permanent contracts. Data are taken from the German Socio-Economic Panel (SOEP), linked with industry-level data on offshoring of materials and services inputs calculated from the World Input Output Database (WIOD). In manufacturing we find that temporary workers face a significant reduction in wages as materials offshoring increases, while permanent workers' wages are unaffected or even tend to increase. Offshoring ofcore activities generally also tends to reduce the probability of becoming unemployed, and more so for temporary than for permanent workers. By contrast, offshoring of services inputs does not have any statistically significant effects on either wages or employment probabilities in manufacturing. In the service industries, workers are affected in terms of employment probabilities from offshoring of services inputs only, although, in contrast to manufacturing industries, there are no statistically significant effects on individual wages from any type of offshoring.

Suggested Citation

  • Holger Görg & Dennis Görlich, 2012. "Offshoring, Wages and Job Security of Temporary Workers," SOEPpapers on Multidisciplinary Panel Data Research 512, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp512
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    2. Enno Schröder, 2020. "Offshoring, employment, and aggregate demand," Journal of Evolutionary Economics, Springer, vol. 30(1), pages 179-204, January.
    3. Borrs, Linda & Eppelsheimer, Johann, 2020. "The effects of foreign direct investment on job stability: Upgrades, downgrades, and separations," IAB-Discussion Paper 202024, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Sabina Szymczak & Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2019. "Position In Global Value Chains:The Impact On Wages In Central And Eastern European Countries," GUT FME Working Paper Series A 53, Faculty of Management and Economics, Gdansk University of Technology.
    5. Hongshik Lee & Joonhyung Lee, 2015. "The impact of offshoring on temporary workers: evidence on wages from South Korea," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(3), pages 555-587, August.
    6. Nicola Gagliardi & Benoît Mahy & François Rycx, 2020. "Trade, GVCs, and wage inequality: Theoretical and empirical insights," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 115-134.
    7. Matilde Cardoso & Pedro Cunha Neves & Oscar Afonso & Elena Sochirca, 2021. "The effects of offshoring on wages: a meta-analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(1), pages 149-179, February.
    8. Koerner, Konstantin & Borrs, Linda & Eppelsheimer, Johann, 2023. "FDI and onshore job stability: Upgrades, downgrades, and separations in multinationals," European Economic Review, Elsevier, vol. 152(C).
    9. Sébastien Lechevalier, 2015. "Globalization and labor market outcomes: de-industrialization, job security, and wage inequalities—introduction by guest editor," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(3), pages 405-408, August.
    10. Benz, Sebastian & Johannesson, Louise, 2019. "Job characteristics, job transitions and services trade: Evidence from the EU Labour Force Survey," Conference papers 333093, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    11. bernhard Boockmann, 2014. "Offshoring Potential and Employment Dynamics," IAW Discussion Papers 111, Institut für Angewandte Wirtschaftsforschung (IAW).
    12. Tan Li & Wei Xiao, 2022. "US antidumping investigations and employment adjustment in Chinese manufacturing firms," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(1), pages 159-182, January.
    13. El-Sahli, Zouheir & Gullstrand, Joakim & Olofsdotter, Karin, 2017. "The Internal and External Effects of Offshoring on Job Security," Working Papers 2017:14, Lund University, Department of Economics.

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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