The Employment Effects of North-South Trade and Technological Change

Many advanced countries have seen the emergence of new types of contractual arrangements, undergone technological change and increased imports from developing countries during last decades of the twentieth century. The latter two developments, by shifting the composition of labour demand towards higher skills, ought to have exacerbated adversity in the labour market, especially for the less skilled. This paper finds that technological changes and increasing imports from developing countries have generally had an effect of shifting labour demand towards higher skills in advanced countries. Typically, when such a shift takes place it ought to reveal itself in increased unemployment, particularly amongst the less skilled. This is not found to be the case. It is argued in this paper that the reason why we do not detect these effects directly, is because the protection regime for labour, both for the unemployed and for the employed has been undergoing changes, and has given rise to adverse non-standard forms employment. These adverse forms of employment act like unemployment absorbers, and some of the employment related adjustments from Southern imports and changes in technology are likely to fall on these adverse employment forms. In short, the expected adverse impact of imports from the South and technological change on the employment situation is as is to be expected, and though it cannot be detected when we look at the unemployment rates, it is apparent when we look at adverse forms of employment.