Offshoring, Globalization, Skill: Impacts of International Offshoring on Employment and Wages

Abstract

The phenomenon of offshoring has become a prominent topic in contemporary economic discussions, closely tied to globalization and communication. Offshoring involves importing input items from foreign countries at a lower cost, enabling cost-effective production. However, it raises concerns among workers regarding job loss and wage reduction. The aspect of collective bargaining, crucial in understanding the dynamics of offshoring, has often been overlooked in previous research. This journal paper aims to address this research gap by examining the impact of collective bargaining on determining equilibrium wages in the context of offshoring. Through a comprehensive analysis of three cases—Autarky, Small Country, and a two-country scenario—we explore how fluctuations in offshoring costs influence employment levels and wage rates. Additionally, we investigate the policy implications of offshoring decisions in one country and their effects on its partner country. The study also considers the role of skill acquisition in the offshoring process and its multifaceted impact on the labor market. By shedding light on the influence of collective bargaining in determining equilibrium wages within the offshoring framework, this research provides valuable insights for policymakers, academics, and industry practitioners. The findings contribute to a more comprehensive understanding of the complexities surrounding offshoring and its implications for the labor market.