Demand for skills in Canada: the role of foreign outsourcing and information‐communication technology

Abstract

One of the defining features of the Canadian Economy in the last two decades has been an increasing wage gap between the more skilled and the less skilled workers. Over the same period, there have been dramatic increases in expenditures on information and communication technologies (ICT) and in purchases of foreign intermediate inputs. This raises an obvious and important question: what is the role of ICT and foreign outsourcing in the increased demand for skilled workers? Using 84 Canadian manufacturing industries over 1981-96, we find that both ICT and foreign outsourcing are important contributors to the demand for skills. JEL classification: F16 O33Demande de qualifications au Canada: le roˆle de la sous-traitance a`l'e´tranger et des technologies d'information et de communication. L'une des caracte´ristiques importantes de l'e´conomie canadienne au cours des deux dernie`res de´cennies a e´te´l'e´cart croissant entre les niveaux de salaires des travailleurs plus et moins qualifie´s. Au cours de la meˆme pe´riode, il y a eu un accroissement important dans les de´penses pour les technologies de l'information et de communication (TIC) et dans les achats d'intrants interme´diaires al 'e´tranger. Voila`qui pose une question e´vidente et importante: quel est l'impact des TIC et de la sous-traitance a`l'e´tranger sur la demande de travailleurs qualifie´s? A l'aide de donne´es pour 84 industries manufacturie`res canadiennes pour la pe´riode 1981-1996, on de´couvre que les TIC et la sous-traitance a`l'e´tranger contribuent de manie`re importante a`la demande de qualifications.

A hybrid production structure in trade: theory and implications

“…In particular, we derive analogous and somewhat different results using a different production structure involving intermediate inputs entering into a Heckscher-Ohlin production nest. As will be evident from below, ours differ from Anwar (2006Anwar ( , 2009, Wälde and Weib (2007), Marjit (1990), Marjit et al (2004), Yan (2006) and Abdi (2007) in terms of methodology and model.…”

“…Das (2005) has considered the effect of trade liberalization on wage inequality, whereas Yan (2006) has estimated a translog cost function and confirmed the roles of both foreign outsourcing and information-communication technology behind wage inequality in Canada. Based on Wälde and Weib (2007), Anwar (2009) proposed a Ricardian model without any capital input to show the adverse effect of downsizing on wage inequality in the presence of internal economies of scale (i.e., in a monopolistic competition structure).…”

Foreign Sourcing of Intermediate Inputs: Impacts on Unskilled Labor in US Manufacturing Industries

“…Morrison Paul and Siegel [2001], relying similarly on data in the NBER's Productivity File, demonstrate that the demand for unskilled labor is reduced via the influence of technological change, with a much smaller effect attributable to the increased reliance on imported inputs. More recently, Yan [2006] uses data for Canadian manufacturing industries from 1981 to 1996 in a study that largely corroborates the Feenstra and Hanson [1999] results. While similarly implying that outsourcing plays the smaller role in Canada, these results remain sensitive to the chosen measure of technology.…”

“…22. Yan's [2006] findings for Canadian manufacturing industries demonstrate that the ''relative contribution depends not only on the exact measure of technology, as in the US case, but also on how we measure skill demand.'' 23.…”

International Trade and the Changing Demand for Skilled Workers in High-Tech Manufacturing

“…The dependent variable, DlnNPWSHict is the percentage change of the non-production worker wage share of the wage bill in the four-digit SIC industry i in county c from time t -1 to t. Following Feenstra andHanson (1999, 1996) and Berman, Bound, and Griliches (1994), and others, non-production wage share is used as a measure of the relative demand for skilled labor. Non-production and production worker status categories found in industry accounts are widely used as proxies for skilled and unskilled workers, respectively (Berman, Bound, and Griliches 1994;Borjas, Freeman, and Katz 1992;Haskel and Slaughter 2002;Lawrence and Slaughter 1993;Leamer 1993;Sachs and Shatz 1994;Yan 2005). Although using production and non-production status as proxies for skill levels has received criticism in the literature for being an unreliable measure of skill classification (Forbes 2001), several other scholars have argued that, despite problems with the nonproduction/production classification, it provides clear and reliable results.…”