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Offshoring, Wages and Job Security of Temporary Workers

  • Görg, Holger

    ()

    (Kiel Institute for the World Economy)

  • Görlich, Dennis

    ()

    (Kiel Institute for the World Economy)

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 of core 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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6897.

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Length: 36 pages
Date of creation: Oct 2012
Date of revision:
Publication status: forthcoming in: Review of World Economics
Handle: RePEc:iza:izadps:dp6897
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  1. Samuel Bentolila & Pierre Cahuc & Juan Jose Dolado & Thomas Le Barbanchon, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," CESifo Working Paper Series 3269, CESifo Group Munich.
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