NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

White Collar Jobs and the Rise of Service Offshoring

Imports from China and India over the past decade have increased the [number of] transitions to unemployment for those working in the service sector... by 0.9 percentage points.

Trade in services has expanded dramatically in the past two decades, and the number of U.S. jobs exposed to service imports is estimated to be at least double the total number of jobs in manufacturing. An important piece of this "service tradability revolution" is the rise of service offshoring, which means that educated U.S. workers are now competing with educated but low-paid foreign workers for service jobs.

In A Sorted Tale of Globalization: White Collar Jobs and the Rise of Service Offshoring (NBER Working Paper No. 17559), co-authors Runjuan Liu and Daniel Trefler examine the impact of trade in services with China and India on U.S. labor market outcomes, and especially on occupational switching, the incidence of unemployment, and earnings. The authors use data from the Current Population Survey for the period 1996-2007. They distinguish workers who switch up -- that is, switch to an occupation that pays more on average than their current occupation - and those who switch down to an occupation that pays less on average than the current occupation.

Liu and Trefler find that rising service imports from China and India over the past decade have increased the incidence of downward switching by 17 percent, while upward occupational switching has only increased by 4 percent.

They also find that transitions to unemployment for those working in the service sector have increased by 0.9 percentage points, from 3.8 percent to 4.7 percent. This effect is substantial, although it is lower than the estimated 1.6 percentage point impact on transitions to unemployment in manufacturing that the authors associate with imports from China and India.

Finally, for occupational "stayers" in the service sector, those who remained in their jobs, the study suggests that earnings fell by 2.3 percent. Notably, these impacts are not annual: they are cumulative effects over the past decade.

--Claire Brunel

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