Please make the answers clear. For each question, provide a brief explanation. W
ID: 1205505 • Letter: P
Question
Please make the answers clear.
For each question, provide a brief explanation. What are some of the main differences between the outsourcing phenomena in manufacturing versus business services? What is "skill premium"? What happened to the size of the skill premium over the last 30 years in the U.S.? Is the trend related to production outsourcing? Justify your answers. List and explain at least three of the micro-level findings on the effect of offshoring on worker wages. Make references to the Danish data study when necessary. Explain why is it difficult to measure and establish the causal effect of outsourcing on worker wages? U.S. skilled workers in business services fear for the security of their jobs due to the possibility of service outsourcing. Do you agree with this claim? Provide arguments in favor or against this claim.Explanation / Answer
Answer 1) outsourcing refers to the concept of getting the non core activities of organisation outsourced that is done by some other private organisation. For example Cleaning of washrooms in malls is outsourced.
The basic difference in the case of manufacturers and service providers is that by outsourcing manufacturers outsource non core business processes to avail the benefit of cost advantage,whereas service providers outsource and make manufacturers end users of such services. It leads to fall in production but increase in services.
answer 2) Skill premium refers to the ratio of wages of skilled to unskilled workers.
Over the passed 30years skill premium has increased tremendously in USA. The causes seems to be skill biased technological change. Companies invest in new and better technologies thus seeking skilled workers who can use them.
Yes the trend is somewhat related to production outsourcing as fall in trade costs increase the demand for skilled labour in USA and abroad, thus increasing Skill premium.
answer 3)a) services offshoring affect the real wages of low & medium skilled workers negatively.
b) Skilled workers benefit from services offshoring in terms of higher real wages.
c) The magnitude of these effects is not much but not even that small to be ignored so efforts should be made to develop skills of low & medium skilled workers.