Employment and occupations in manufacturing - PowerPoint Presentation

1. Employment and occupations in manufacturing Global Value Chains (GVCs): an analysis of European countriesMarta Solaz, Francisco Pérez and Eva BenagesFifth World KLEMS ConferenceJune 4-5, 2018Harvard University

2. MotivationThe emergence of global value chains (GVCs) has led to a decline in the domestic value added (VA) content of countries’ final manufacturing production: Important differences among EU countries (ranging from 40% to 72% in 2014).What are the implications for employment? The share of domestic jobs over total GVC jobs shows greater differences among countries (ranging from 30% to 90%).In several countries, the decline in domestic employment has been larger than in VA.Figure 1. Domestic value added and jobs in EU countries’ manufacturing GVCs, 2000-2014(percentage)Source: authors’ calculations based on WIOD (2016)a) Value addedb) Jobs

3. Motivation VA in manufacturing GVCs has increased (domestic and foreign), whereas the number of jobs have decreased in most European countries.Domestic jobs in manufacturing GVCs of European countries have decreased, whereas the amount of foreign workers has increased in many countries.c) Jobs: domestic and foreignb) Value added: domestic and foreignFigure 2. Changes in value added and jobs in EU countries’ manufacturing GVCs, 2000-2014 (annual percentage change)Source: authors’ calculations based on WIOD (2016)a) Value added and jobs

4. ObjectivesWe analyse the trends in the employment and occupational content embodied in manufacturing GVCs (GVC Jobs):Jobs that are directly and indirectly involved in the production of a given country-sector (Timmer, Stehrer & de Vries (2013), Timmer et al. (2014)).We focus on the big five European countries (Germany, France, Italy, UK and Spain).The analysis covers the period 2000-2014 (2008-2014 when we distinguish employment by occupations).

5. Research questionsHow the employment in GVCs and its occupational content are evolving?Are there any differences in the employment and its occupational content in GVCs…across countries and sectors?between domestic and foreign workers?Is there upgrading in the occupational content of employment in GVCs (domestic and foreign)?Upgrading: changes in the occupational content of employment towards higher-skilled occupations and activities (Humphrey & Schmitz, 2002).

6. Related literatureRelevant extension of GVC analysis:Estimates of the domestic VA content of production and trade; countries’ participation in GVCs: Daudin, Rifflart & Schweisguth (2011), Johnson & Noguera (2012), Baldwin & Lopez-Gonzalez (2013, 2015), Johnson (2014), Koopman, Wang & Wei (2014).Factor content of production and trade: Trefler & Zhu (2010), Timmer, Stehrer & de Vries (2013); Timmer et al. (2014).Skill content, upgrading and job polarization:De Vries et al. (2016), de Vries and Miroudot (2016), Reijnders & de Vries (2017), Marcolin, Miroudot & Squicciarini (2016).

7. MethodologyThe fundamental input-output identity (Leontief, 1936):reflects the output needed () to satisfy a certain level of final demand ().With N countries and S sectors, this equation can be expanded into an inter-regional input-output model:where X is the output decomposition matrix, B is the Leontief inverse or total requeriment matrix, Y is the final demand matrix.The value added embodied in production flows can be derived by pre-multiplying by , a matrix with value-added ratios to gross output in the main diagonal: is the value-added production matrix.We replace the value-added matrix by the employment requeriments per dollar of production (): 

8. Methodology gives the total amount of workers employed to satisfy a given level of final demand.Data on employment requirements can be decomposed into workers by occupations ():where is a matrix with occupational requeriments per dollar of production.We consider 9 different matrices, one for each type of occupation (G=1,…,9). gives the total amount of workers by occupations employed to satisfy a given level of final demand. 

9. MethodologyWe calculate the number of workers by occupations employed in each manufacturing GVC. 532 GVCs for each year (19 manufacturing sectors x 28 European countries), from 2000 to 2014 (2008-2014 in the case of occupations).Results for the whole manufacturing sector and for the EU-28 are obtained by aggregating the data.Total jobs (directly and indirectly) involved in the GVC of a given country-sector are attributed to:Countries that participate (N)Industries (S)Workers by occupation (G)

10. DataInternational input-output tables from the World Input-Output database (WIOD, 2016 Release).Data on employment by occupations and economic activity is obtained from Eurostat Labour Force Survey (LFS).National industry classifications are mapped to the 56 industries in WIOD.9 occupations (1 digit ISCO08).We aggregate them into 3 groups by skill type following ILO (2012):ISCO08NameQualificationOC1ManagersHigh-skilledOC2ProfessionalsOC3Technicians and Associate ProfessionalsOC4Clerical Support WorkersMedium-skilledOC5Services and Sales WorkersOC6Skilled Agricultural, Forestry and Fishery WorkersOC7Craft and Related Trades WorkersOC8Plant and Machine Operators and AssemblersOC9Elementary OccupationsLow-skilledWe calculate the occupation shares for each country, industry and year. These shares are applied to data on employment from WIOD Socio Economic Accounts (SEA), which we use as a benchmark.

11. Jobs in EU countries’ manufacturing GVCsDomestic jobs in EU countries’ manufacturing GVCs have decreased.Employment from outside the EU has increased in the EU-28, Spain, Germany and France.Figure 3. Jobs in EU countries’ manufacturing GVCs, 2000-2014 (number of persons in thousands)Source: authors’ calculations based on WIOD (2016)

12. Jobs in EU countries’ manufacturing GVCsFrom 2000 to 2014, the share of domestic jobs has decreased, and the importance of jobs coming from EU and especially non-EU countries has increased.Source: authors’ calculations based on WIOD (2016)Figure 4. Jobs by origin in the manufacturing GVCs of selected EU countries (percentage)

13. Jobs in EU countries’ manufacturing GVCsDomestic jobs have decreased in almost all manufacturing sectors, whereas the amount of foreign workers has increased, especially in Spain and Germany.Substantial heterogeneity across sectors and countries in terms of employment variations.Figure 5. Jobs by origin in the manufacturing GVCs of selected EU countries, 2000-2014 (annual percentage change)Source: authors’ calculations based on WIOD (2016)a) Spainb) Germanyc) Franced) Italye) United Kingdom

14. Occupations in manufacturing GVCs: domestic vs. rest of EuropeHigh-skilled (HS) occupations account for a larger share among foreign European workers in the case of Spain, and to a lesser extent, in Germany and Italy in 2014.The share of HS workers is higher for domestic workers in France and UK, increasing between 2008 and 2014, while in Spain, Germany and Italy, it has decreased.a) Spainb) Germanyc) Franced) Italye) United KingdomNote: “Rest of Europe” includes other EU-28 countries, Norway and Switzerland.Source: authors’ calculations based on WIOD (2016) and Eurostat LFS (2018)Figure 6. Jobs by occupations in the manufacturing GVCs of selected EU countries, 2008-2014 (percentage)

15. High-skilled occupations in manufacturing GVCsTable 1. High-skilled occupations in the manufacturing GVCs of selected EU countries, 2014 (percentage)  SpainGermanyItalyFranceUnited Kingdom  DOMRest EURDOMRest EURDOMRest EURDOMRest EURDOMRest EURFood products, beverages and tobacco productsC10-C1220,923,221,926,120,923,328,029,531,329,8Textiles, wearing apparel and leather productsC13-C1521,427,828,030,626,629,237,028,536,832,2Wood and of products of wood and cork, except furnitureC1622,831,728,630,023,728,932,230,929,329,8Paper and paper productsC1729,833,128,134,929,234,437,432,338,335,0Printing and reproduction of recorded mediaC1833,733,924,935,729,535,339,334,338,635,1Coke and refined petroleum products C1939,840,535,147,238,542,746,042,650,544,6Chemicals and chemical products C2034,336,638,339,637,138,049,737,046,438,3Basic pharmaceutical products and pharmaceutical preparationsC2144,538,345,040,449,541,156,638,058,840,3Rubber and plastic productsC2229,333,729,536,731,035,641,435,336,636,2Other non-metallic mineral productsC2327,034,329,339,029,236,838,234,636,936,5Basic metalsC2428,335,128,537,429,434,744,434,538,635,6Fabricated metal products, except machinery and equipmentC2522,734,425,334,226,833,841,033,039,734,0Computer, electronic and optical productsC2644,537,644,038,046,138,155,835,560,038,0Electrical equipmentC2733,035,035,435,236,034,446,534,347,335,7Machinery and equipment n.e.c.C2837,035,036,835,437,234,644,334,142,335,0Motor vehicles, trailers and semi-trailersC2928,634,034,333,341,034,440,333,638,434,2Other transport equipmentC3036,035,438,436,940,335,751,936,749,636,2Furniture; other manufacturingC31_C3227,632,840,032,931,232,243,032,840,434,2Repair and installation of machinery and equipmentC3325,336,135,236,627,635,145,733,941,435,7Total manufacturingMAN26,431,532,134,130,632,338,233,840,535,1            There are important differences in the share of HS occupations across sectors and countries.In Spain, HS occupations account for a larger share among foreign European workers compared with domestic workers in almost all sectors. Germany and Italy are in an intermediate situation.On the contrary, in France and UK, almost all sectors exhibit a higher share of HS occupations among domestic workers.Note: “Rest EUR” includes other EU-28 countries, Norway and Switzerland.Source: authors’ calculations based on WIOD (2016) and Eurostat LFS (2018)

16. High-skilled occupations in GVCs: evidence of upgrading?Table 2. High-skilled occupations in the manufacturing GVCs of selected EU countries. Change over 2008-2014 (pp.)  SpainGermanyItalyFranceUnited Kingdom  DOMRest EURDOMRest EURDOMRest EURDOMRest EURDOMRest EURFood products, beverages and tobacco productsC10-C12-2,1-5,2-0,3-2,4-9,3-1,92,9-1,3-1,3-0,8Textiles, wearing apparel and leather productsC13-C15-3,3-3,8-3,02,0-2,2-0,11,8-0,51,01,2Wood and of products of wood and cork, except furnitureC161,00,51,20,60,70,93,71,51,00,8Paper and paper productsC170,9-0,6-1,11,8-1,51,22,80,72,21,5Printing and reproduction of recorded mediaC18-2,8-0,7-2,31,7-7,61,86,80,8-0,31,2Coke and refined petroleum products C198,63,5-0,110,00,06,72,25,64,45,8Chemicals and chemical products C201,40,0-1,42,0-3,81,25,30,65,81,0Basic pharmaceutical products and pharmaceutical preparationsC210,60,6-4,00,50,12,9-0,8-1,08,2-0,5Rubber and plastic productsC222,0-0,7-0,11,1-2,20,66,2-0,33,21,0Other non-metallic mineral productsC231,2-0,2-0,63,4-0,42,36,91,32,42,2Basic metalsC241,21,7-1,34,2-1,62,16,11,84,42,3Fabricated metal products, except machinery and equipmentC25-0,31,30,51,9-0,51,19,90,93,81,2Computer, electronic and optical productsC263,80,3-1,30,50,4-0,9-1,1-1,712,90,8Electrical equipmentC272,90,7-3,70,91,80,47,30,06,71,0Machinery and equipment n.e.c.C286,00,9-0,41,61,60,93,40,32,71,5Motor vehicles, trailers and semi-trailersC290,60,1-0,81,06,71,3-2,90,22,10,8Other transport equipmentC303,50,7-0,10,13,00,91,8-0,15,11,5Furniture; other manufacturingC31_C321,20,111,61,7-1,81,03,60,82,51,4Repair and installation of machinery and equipmentC330,00,3-4,21,9-6,81,08,80,54,21,1Total manufacturingMAN-0,2-1,2-0,31,3-2,10,62,40,33,01,3            For the whole manufacturing sector, there is upgrading (domestic and foreign) in France and UK. Spain shows the opposite pattern. In Germany and Italy, the importance of HS occupations among foreign European workers has increased, whereas the share of domestic HS occupations has decreased.There is domestic upgrading during the period 2008-2014 in many sectors in Spain, France, Italy and United Kingdom, but not in Germany. Upgrading has been more general in foreign European jobs.Note: “Rest EUR” includes other EU-28 countries, Norway and Switzerland.Source: authors’ calculations based on WIOD (2016) and Eurostat LFS (2018)

17. Looking into high-skilled occupationsThe decrease in domestic HS occupations in Spain, Germany and Italy can be attributed to decreases in the share of managerial workers. Professional workers exhibit increases in these countries, although they do not compensate that decrease.In UK, the decline in managerial workers is more than compensated by the large increase in professional workers (8,5pp). In France, domestic upgrading is related to the increasing importance of technicians and associate professionals (OC3).a) Spainb) Germanyc) Franced) Italye) United KingdomFigure 7. High-skilled occupations in the manufacturing GVCs of selected EU countries (percentage)Note: “Rest of Europe” includes other EU-28 countries, Norway and Switzerland.Source: authors’ calculations based on WIOD (2016) and Eurostat LFS (2018)

18. Concluding remarksTrends in employment embodied in GVCs:The importance of manufacturing production for employment is decreasing in EU countries. Decreases in the amount of domestic workers involved in each country’s manufacturing GVCs, which are pervasive across the GVC of almost all manufacturing sectors.Integration in GVCs is progressing: the importance of foreign workers (from other EU and non-EU countries) has increased, particularly from non-EU countries.Occupations in GVC Jobs:Important differences in the share of HS occupations across sectors, and within the same sector by countries.In Spain, Germany and Italy, the share of HS occupations is higher among foreign European workers. In France and UK, the situation is the opposite.These differences at country-level are also found in many manufacturing sectors.Upgrading among workers from other European countries has taken place in almost all sectors.In Spain, Germany, Italy and UK, upgrading among domestic workers has been driven by professional occupations.

19. Implications and future extensionsGenerating good jobs in GVCs is a major concern.Higher value added activities.High-skilled jobs are less likely to be affected by automation.When working with European countries, no evidence that the foreign content embodied in the big five EU countries’ GVCs is composed of lower-skilled tasks.Future research:How would these results change if all countries included in WIOD were considered?Which is the trend for the period 2000-2014?Which is the evolution of countries’ participation in GVCs in terms of labour compensation?

20. Employment and occupations in manufacturing global value chains (GVCs): an analysis of European countriesMarta Solaz, Francisco Pérez and Eva BenagesFifth World KLEMS ConferenceJune 4-5, 2018Harvard University

21. Appendix. Structure of GVCs by occupations  Country 1Country 2Country N  GVC1…GVCvGVC1…GVCvGVC1…GVCvJobs from each country-industryCountry 1Industry 1 Ocup1         Ocup2 Ocup3…Ocup9… Ocup1         Ocup2 Ocup3…Ocup9Industry S Ocup1         Ocup2 Ocup3…Ocup9Country 2Industry 1 …        … …        Industry S …        Country NIndustry 1         …         Industry S         Total jobs by occupations employed in each GVC