Vulnerable Jobs and the Wage Effects of Import Competition

• Date: 01 July 2019
• Published date: 01 July 2019
• DOI: http://doi.org/10.1111/irel.12240
• Author: David Rigby,Abigail Cooke,Tom Kemeny

Vulnerable Jobs and the Wage Effects of Import

Competition*

ABIGAIL COOKE , TOM KEMENY and DAVID RIGBY

Do job characteristics modulate the relationship between import competition and

workers’wages? Using pooled cross-sectional, linked employee-establishment

Census Bureau microdata and O*NET occupational characteristics, the paper

models import competition and wages for more than 1.6 million individuals,

grouped by job vulnerability defined by routineness, analytic complexity, and

interpersonal interaction. Results show import competition is associated with

wages that are: lower in routine and less complex jobs; higher in nonroutine and

complex jobs; and higher for the highest and lowest levels of interpersonal inter-

action. This demonstrates the importance of accounting for occupational charac-

teristics in understanding how trade and wages relate.

Introduction

Over the past half century, dramatic improvements in transportation tech-

nologies have significantly reduced the cost of moving goods (e.g., Levinson

2006). Advances in communication technologies have simultaneously reduced

the cost of information exchange. These changes fostered a great expansion in

trade of goods and services, enabling firms to better develop and control value

chains distributed across the globe (Bonacich and Wilson 2008; Coe and

Yeung 2015; Gereffiand Korzeniewicz 1994; Kleibert 2015). The rise in the

complexity of global production networks, related-party trade, and foreign

direct investment flows indicates that growing numbers of businesses are

exploiting newfound capacities to fragment production across developed and

*The authors’affiliations are, respective, University at Buffalo, State University of New York, Buffalo, New

York. E-mail: amcooke@buffalo.edu; Queen Mary, University of London, London, UK. E-mail: t.ke-

meny@qmul.ac.uk; University of California at Los Angeles, Los Angeles, California. E-mail: rigby@-

geog.ucla.edu. This research uses confidential data from the U.S. Census Bureau. Any opinions and

conclusions expressed herein are those of the authors and do not represent the views of the U.S. Census

Bureau. All results have been reviewed to ensure that no confidential information has been disclosed. The

authors acknowledge support for this project from the National Science Foundation under grant number

BCS-0961735. Help by Arnie Reznek and Frank Limehouse at the U.S. Census Bureau on disclosure avoid-

ance review is gratefully acknowledged.

INDUSTRIAL RELATIONS, DOI: 10.1111/irel.12240. Vol. 58, No. 3 (July 2019). ©2019 The Regents of the

Universit y of Calif ornia Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA,

and 9600 Garsington Road, Oxford, OX4 2DQ, UK.

484

developing economies alike. Unlike traditional spatial divisions of labor built

around finished goods such as those described by Ricardo (1891), or on

monopolistic competition between varieties of goods as analyzed by Krugman

(1979), the contemporary reworking of the production and trade landscape

involves a much finer-grained division of production possibilities that Baldwin

(2006), Blinder (2006), and Grossman and Rossi-Hansberg (2006) tie not to

industries but to production tasks.

Tasks represent all the incremental steps of the production process necessary

to design, test, construct, assemble, sell, and deliver intermediate goods and,

eventually, final products and services. More specifically, Grossman and

Rossi-Hansberg (2012: 595) define tasks as “the finest possible addition to the

value added of a good or service done by a particular factor of production,”

with the production of intermediate goods comprising “bundles”of tasks. The

proliferation of trade in such bundles of tasks has relied on the ability to inte-

grate and control distributed production networks, involving the efficient and

cost-effective coordination of the movement of goods, services, and informa-

tion across the globe. This is remapping patterns of global trade and

specialization.

This article joins a growing literature exploring how these substantial shifts

have affected worker welfare. It builds on prior work that discriminates

between workers on the basis of the tasks they perform. This work argues that

relatively routine tasks, meaning those that can be readily codified, are increas-

ingly vulnerable to being offshored (Baldwin 2006; Blinder 2006; Leamer and

Storper 2001), or replaced by computers, robots, and related technological

investments (e.g., Autor, Levy, and Murnane 2003). When workers performing

these tasks are not displaced by foreign competition or automation, they likely

experience downward pressure on their wages, driven by import competition

from low-wage countries. In contrast, tasks that involve complex judgment-

based decisions, and those requiring interpersonal interaction, are costlier to

offshore and automate. For firms with workers specialized in these less routine

tasks, globalization may actually increase demand and wages. We theorize that

while trade today is more complicated than “wine for cloth,”shifts in compar-

ative advantage are simply more fine-grained, hewing closer to tasks than final

goods. The distributional consequences of these patterns of trade should be

visible in the relative wages earned by workers engaged in different kinds of

tasks.

This paper explores whether the job characteristics of U.S. workers influ-

ence how import competition from low-wage countries shapes their wages. We

expect that workers will be more vulnerable to low-wage country import com-

petition if the tasks they perform are (a) highly routine, (b) require little ana-

lytic complexity, and (c) involve scant interpersonal interaction. To test these

Vulnerable Jobs and Import Competition / 485

hypotheses, we build standard measures of low-wage import competition using

annual U.S. trade data, and relate these to individual and establishment charac-

teristics derived from U.S. Census Bureau data. We estimate pooled cross-sec-

tional models predicting annual wages for 1.6 million workers across the years

1990, 2000, and 2007. Each worker’s occupation is the basis for their task

profile, built from the U.S. Department of Labor’sO*NET database. The

resulting dataset allows us to model the effect of low-wage import competition

on the wages of workers with different occupational characteristics, net of the

effects of education, demographics, and establishment characteristics.

In relation to important recent work in the same area, we add value in a few

ways. We add to the findings of Autor and colleagues (Autor, Dorn, and Han-

son 2013a, 2016; Autor et al. 2014) by linking the impacts of rising import

competition on worker wages to the task character of different occupations,

responding to their call for “recharacterizing the sets of individuals who are

likely candidates for opposing distributional consequences from economic inte-

gration”(Autor, Dorn, and Hanson 2016: 234). We expand on the insights of

Ebenstein et al. (2013) that note the importance of thinking less about industry

and more about occupations when trying to unpack the impacts of globaliza-

tion, by observing multiple trade-vulnerable task characteristics. Cumulatively,

this builds the understanding of these dynamics in the U.S. context. In doing

so, we are also in conversation with similar work in Germany (Baumgarten,

Geishecker, and G€

org 2013) and Denmark (Hummels et al. 2014); this con-

tributes to the growing evidence of the importance of occupational tasks in

modulating the impacts of import competition across advanced economies.

To preview the findings, we show that task characteristics mediate the wage

effects of low-wage import competition. Import competition from low-wage

countries is associated with lower wages for workers with highly routine man-

ual jobs and workers with jobs that have low analytic complexity. At the same

time, workers in jobs with less routine manual tasks and greater analytic com-

plexity earn higher wages when low-wage import competition rises. The influ-

ence of interpersonal task intensity on the trade–wage relationship is less

straightforward to unpack. Workers in occupations with high levels of interper-

sonal interaction have higher wages when there is greater import competition

from low-wage countries. Interestingly, the same is true for workers with the

lowest levels of interpersonal interaction in their jobs. Only workers with med-

ium-low levels of interpersonal interaction in their occupations suffer lower

wages with increased low-wage import competition. Interaction effects show

that the mediating relationship of task intensity is nonlinear. These results

demonstrate the importance of accounting for occupational characteristics to

more fully understand the relationship between trade and wages and suggest

underappreciated aspects of trade’s distributional effects within countries.

486 / ABIGAIL COOKE,TOM KEMENY,AND DAVID RIGBY