Memorandum: Data Needs for Research on Domestic Outsourcing in the United States

Available evidence points to substantial growth in U.S. firms’ outsourcing of various functions to domestic as well as foreign suppliers, a phenomenon sometimes called the vertical disintegration of the firm. Although receiving less attention than its offshore counterpart, domestic outsourcing is changing how work in the U.S. is organized across firms and industries. Good data allowing documentation of such supply networks is critical to the accuracy of many analyses, including employment impact analyses of a wide range of federal, state, and local economic policies; occupational workforce projections; and sector and industry productivity statistics. Moreover, although there are many reasons why firms outsource tasks, domestic outsourcing may be an important mechanism by which some firms cut labor costs including compensation, thereby contributing to the growth in earnings inequality. Yet, large data gaps limit the ability to conduct research on how outsourcing is changing the organization of work and affecting workers’ earnings and other aspects of job quality. In this memo, we offer strategies to improve the data to document and analyze the prevalence of domestic outsourcing in the U.S. and its effects on wages and other measures of job quality. The memo builds on a white paper we recently released with our co-authors Rose Batt and Eileen Appelbaum, Domestic Outsourcing in the U.S.: A Research Agenda to Assess Trends and Effects on Job Quality

Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations

We use a unique new data set that combines individual worker data with data on workers' employers to estimate plant-level production functions and wage equations, and thus to compare relative marginal products and relative wages for various groups of workers. The data and empirical framework lead to new evidence on numerous questions regarding the determination of wages, questions that hinge on the relationship between wages and marginal products of workers in different demographic groups. These include race and sex discrimination in wages, the causes of rising wages over the life cycle, and the returns to marriage. First, workers who have ever been married are more productive than never-married workers and are paid accordingly. Second, prime-aged workers (aged 35-54) are equally as productive as younger workers, and in some specifications are estimated to receive higher wages. However, older workers (aged 55+) are less productive than younger workers but are paid more. Third, the data indicate no difference between the relative wage and relative productivity of black workers. Finally, with the exception of managerial and professional occupations, women are paid about 25-35% less than men, but estimated productivity differentials for women are generally no larger than 15%, and significantly smaller than the pay differential.

The Economic Impact of H-2B Workers

The Labor, Immigration & Employee Benefits division of the U.S. Chamber of Commerce and Immigration Works USA are pleased to present this important study of the economic impact of the H-2B visa program. Many American businesses could not function without the H-2B program. Small, medium-sized and large employers in every region of the country count on it to keep their businesses open and growing, and to create opportunities for U.S. workers. Yet the program is under constant attack by critics, who all too often make a case based on rhetoric and hypothetical scenarios, not hard economic data. This report uses original economic analyses to examine the true economic effects of the H-2B program

The Transforming Importance of Social Skills in the Labor Market in the 2010s

The growing importance of social skills has led to an increase in returns to wages and employment for workers specializing in social skill-intensive occupations. Between 2012 and 2019, social skill-intensive occupations grew by 3 percentage points as a share of the U.S. labor force. Math-intensive occupations also grew by a similar amount during this time. To analyze these patterns, I utilize a model of team production where workers trade tasks to exploit their comparative advantage. Social skills reduce coordination costs between workers and allow them to specialize and cooperate with other workers more effectively by trading tasks. This model predicts that workers adept in social skills sort into occupations that utilize and reward their abilities more, which is evaluated by looking at the changes between the NLSY79 and NLSY97 survey waves. Using various skill measures and covariates across these waves, I find that the positive labor market returns to social skills slightly diminished in the 2010s when compared to the greater returns of the 2000s

Trends in U.S. Wage Inequality: Re-Assessing the Revisionists

A recent "revisionist " literature characterizes the pronounced rise in U.S. wage inequality since 1980 as an "episodic " event of the first-half of the 1980s driven by non-market factors (particularly a falling real minimum wage) and concludes that continued increases in wage inequality since the late 1980s substantially reflect the mechanical confounding effects of changes in labor force composition. Analyzing data from the Current Population Survey for 1963 to 2005, we find limited support for these claims. The slowing of the growth of overall wage inequality in the 1990s hides a divergence in the paths of upper-tail (90/50) inequality -- which has increased steadily since 1980, even adjusting for changes in labor force composition -- and lower tail (50/10) inequality, which rose sharply in the first-half of the 1980s and plateaued or contracted thereafter. Fluctuations in the real minimum wage are not a plausible explanation for these trends since the bulk of inequality growth occurs above the median of the wage distribution. Models emphasizing rapid secular growth in the relative demand for skills -- attributable to skill-biased technical change -- and a sharp deceleration in the relative supply of college workers in the 1980s do an excellent job of capturing the evolution of the college/high-school wage premium over four decades. But these models also imply a puzzling deceleration in relative demand growth for college workers in the early 1990s, also visible in a recent "polarization" of skill demands in which employment has expanded in high-wage and low-wage work at the expense of middle-wage jobs. These patterns are potentially reconciled by a modified version of the skill-biased technical change hypothesis that emphasizes the role of information technology in complementing abstract (high-education) tasks and substituting for routine (middle-education) tasks.

Why Do Temporary Help Firms Provide Free General Skills Training?

Nominally free, unrestricted training in portable computer skills is offered by the majority of U.S. temporary help supply (THS) establishments, a practice that is inconsistent with the competitive model of training. This paper asks why temporary help firms provide free general skills training. The answer proposed is that in addition to skills formation, training plays an informational role at THS firms by eliciting private information about worker ability. The model is built on the premise that training is more productive and therefore valuable to high ability workers. Firms offer a package of training and initially lower wages that induces self-selection. Workers of high perceived ability choose training in anticipation of a steeper wage profile while low ability workers are deterred by limited expected gains. Firms profit from their sunk training investment via their short-run informational advantage about ability and thereby limited monopsony power. Market competition among THS firms reduces employer rents, yielding higher wages and more training. Detailed tests of the model using representative establishment data on wages and training find strong support. The analysis demonstrates that beyond providing spot market labor, THS firms gather and sell information about worker quality to clients. The rapid growth of THS as a labor market information broker implies that the demand for worker screening is rising.

How Computer Automation Affects Occupations: Technology, Jobs, and Skills

This paper investigates basic relationships between technology and occupations. Building a general occupational model, I look at detailed occupations since 1980 to explore whether computers are related to job losses or other sources of wage inequality. Occupations that use computers grow faster, not slower. This is true even for highly routine and mid-wage occupations. Estimates reject computers as a source of significant net technological unemployment or job polarization. But computerized occupations substitute for other occupations, shifting employment and requiring new skills. Because new skills are costly to learn, computer use is associated with substantially greater within-occupation wage inequality

Skills, Tasks and Technologies: Implications for Employment and Earnings

A central organizing framework of the voluminous recent literature studying changes in the returns to skills and the evolution of earnings inequality is what we refer to as the canonical model, which elegantly and powerfully operationalizes the supply and demand for skills by assuming two distinct skill groups that perform two different and imperfectly substitutable tasks or produce two imperfectly substitutable goods. Technology is assumed to take a factor-augmenting form, which, by complementing either high or low skill workers, can generate skill biased demand shifts. In this paper, we argue that despite its notable successes, the canonical model is largely silent on a number of central empirical developments of the last three decades, including: (1) significant declines in real wages of low skill workers, particularly low skill males; (2) non-monotone changes in wages at different parts of the earnings distribution during different decades; (3) broad-based increases in employment in high skill and low skill occupations relative to middle skilled occupations (i.e., job 'polarization'); (4) rapid diffusion of new technologies that directly substitute capital for labor in tasks previously performed by moderately-skilled workers; and (5) expanding offshoring opportunities, enabled by technology, which allow foreign labor to substitute for domestic workers in specific tasks. Motivated by these patterns, we argue that it is valuable to consider a richer framework for analyzing how recent changes in the earnings and employment distribution in the United States and other advanced economies are shaped by the interactions among worker skills, job tasks, evolving technologies, and shifting trading opportunities. We propose a tractable task-based model in which the assignment of skills to tasks is endogenous and technical change may involve the substitution of machines for certain tasks previously performed by labor. We further consider how the evolution of technology in this task-based setting may be endogenized. We show how such a framework can be used to interpret several central recent trends, and we also suggest further directions for empirical exploration.

Skill-biased technological change in Vietnam

Previous research has found evidence for the existence of skill-biased technological change in both the USA and Europe. However, similar studies are still limited in developing countries. There has not been any previous research that measured skill-biased technological change in Vietnam. The research question that this study aims to answer is if there is a skill-biased technological change in Vietnam. Based on data collected from the Vietnam Household Living Standards Survey from 2004 to 2014, this thesis measures the skill-biased technological change in Vietnam by measuring relative skill productivity. Relative skill productivity is calculated using the elasticity of substitution between skilled and unskilled workers, skill premium, the respective factor augmenting technology term of unskilled workers, and the respective factor augmenting technology term of skilled workers. The thesis developed a regression model for estimating wage as informed by the Mincer (1974) wage equation. The findings provided evidence that skill-biased technological change occurred in Vietnam during the period 2004 to 2008. It also provided empirical evidence of the wage gap between skilled and unskilled workers, between male and female workers, and between urban and rural areas. This thesis provides policy recommendations to improve the wage differential and the skill of the workers in Vietnam