ICT, Offshoring, and the Demand for Part-time Workers: The Case of Japanese Manufacturing

Transcription

1 Summary Introduction Kiyota and Maruyama (2016) Conclusion... Appendix.... ICT, Offshoring, and the Demand for Part-time Workers: The Case of Japanese Manufacturing Kozo Kiyota Keio University Sawako Maruyama Kobe University June 1, 2016 Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

2 Summary Introduction Kiyota and Maruyama (2016) Conclusion... Appendix.. Introduction Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

3 Investment Position (Trillion JPY) Source: Ministry of Finance (2015) International Investment Position of Japan. Japanese outward foreign direct investment (FDI) is expanding rapidly.

4 Summary Introduction Pros and Cons of FDI Kiyota and Maruyama (2016) Conclusion... Appendix.. Current profit earned by Japanese foreign affiliates amounts to 7.6 trillion JPY. Current profit earned by Japanese firms in Japan is 24.1 trillion JPY. According to the Japanese Ministry of Economy, Trade and Industry (METI), retained earnings owned by Japanese foreign affiliates amount to 28.7 trillion JPY. Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

5 Goods and services Direct investment Others Current account Notes: Trillion JPY. Others include such items as income. Source: Ministry of Finance (2016) Balance of Payments Statistics. Negative trade balance is offset by direct investment income in recent years.

6 A Simple Theory of FDI: Win-Win Relationship Capital price Home Foreign Capital price S' S S* S*' g a r* h i r' b c d r j k e f D D* O Capital O* Capital Capital moves from home (S S ) to foreign (S S ) so that capital price is equalirzed to r. Home = (c + f ) & Foreign = (i + k) Capital owner returns her profits k(= c + d + f ) from foreign to home. Both countries can have welfare gains from FDI: Home = d & Foreign = i

7 Ratio of foreign production to domestic production (%) Source: Ministry of Economy, Trade and Industry (various years) Basic Survey of Overseas Business Activities. The share of foreign production by Japanese firms is increasing...

8 450 12, ,321 10,000 Number of establishmens (1,000) , ,000 6,000 4,000 2,000 Number of workers (1,000) Number of establishments (1,000) Number of workers (1,000) Source: Ministry of Economy, Trade and Industry (various years) Census of Manufactures.... and the manufacturing employment is decreasing...

9 Pros and Cons of FDI Do multinationals destruct more jobs than domestic firms in Japan? No. Previous studies did not find evidences that multinationals destruct more jobs than domestic firms in Japan. Possible explanations:.1 FDI helps increasing the production of intermediate inputs in the home country, which result in the maintenance of, or an increase in, domestic labor demand..2 The magnitude of job destruction is almost the same between Japanese multinationals and domestic firms (Yamashita and Fukao, 2010, JWE)..3 Disemployment in Japanese manufacturing was driven mainly by substitution between capital and labor, rather than by the reallocation of labor from Japan to overseas (Kambayashi and Kiyota, 2015, RWE).

10 Summary Introduction Toyota s plant Kiyota and Maruyama (2016) Conclusion... Appendix.. Source: html Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

11 Summary Introduction Pros and Cons of FDI Kiyota and Maruyama (2016) Conclusion... Appendix.. One may be concerned that the effects of FDI could be different across skill types. In particular FDI means the offshoring of production activities. Offshoring increases the demand for high-skilled workers... while decreasing the demand for low-skilled workers. Note that, theoretically, the increases in the relative demand for skilled workers can be explained by both offshoring and skill-biased technological change (due to the use of computers and other high-tech equipment). Kiyota and Maruyama (2016) addressed this issue. Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

12 Summary Introduction Kiyota and Maruyama (2016) Conclusion... Appendix.. Kozo Kiyota and Sawako Maruyama (2016) ICT, Offshoring, and the Demand for Part-time Workers: The Case of Japanese Manufacturing Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

13 Summary What we do? This paper examines the effects of information and communication technology (ICT) and offshoring on the skill demand in Japanese manufacturing. What s new? This paper focuses explicitly on the demand for low-wage part-time workers, which we call low skilled workers.

14 Summary Data Introduction Kiyota and Maruyama (2016) Conclusion... Appendix.. Sources JIP database (RIETI) and IO tables JIP database is a database like the EU-KLEMS database. Coverage Period 52 manufacturing industries (every 5 year between 1980 and 2005, and 2011) Worker Type Full-time: 1) university graduates; 2) college graduates; 3) high-school graduates; 4) junior-high school graduates Part-time (educational level is not available): defined as the workers whose average number of hours worked in a week is less than 35 hours. Self-employed (educational level is not available) Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

15 Figure 1. Average Wages ,500 University 4,000 3,500 Average Wages / Hour (Japanese Yen) 3,000 2,500 2,000 1,500 1,000 University College College High High Junior High Junior High Part-time Self-employed 500 Self-employed Part-time Cummulative Manufacturing Workers (%). 1 The average wages are different across educational level and worker types. The average wages of part-time workers is less than half of that of junior-high school graduates. Difference between college/high school graduates and junior-high school graduates is also not negligibly small in 2011.

16 Figure 1. Average Wages ,500 University 4,000 3,500 Average Wages / Hour (Japanese Yen) 3,000 2,500 2,000 1,500 1,000 University College College High High Junior High Junior High Part-time Self-employed 500 Self-employed Part-time Cummulative Manufacturing Workers (%). 2 The share of part-time workers in manufacturing employment expanded significantly: 7.7% in 1980 to 17.7% in 2011 Noting that the share of university graduates was 18.5% in 2011, the size of part-time workers is not negligible in Japanese manufacturing employment.

17 Figure 1. Average Wages ,500 University 4,000 3,500 Average Wages / Hour (Japanese Yen) 3,000 2,500 2,000 1,500 1,000 University College College High High Junior High Junior High Part-time Self-employed 500 Self-employed Part-time Cummulative Manufacturing Workers (%). 3 Labor inputs can be classified into four groups. 1) High skilled workers: university graduates 2) Middle-high skilled workers: college or high school graduates 3) Middle-low skilled workers: junior-high school graduates 4) Low skilled workers: part-time workers * Self-employed workers are excluded because they are employer, not employee.

18 Summary Methodology Introduction Kiyota and Maruyama (2016) Conclusion... Appendix.. We estimate the standard translog cost function: S ijt = α ij + J α js ln w ijt + s=1 J δ jk ln x ikt + j=1 R α jr z irt r=1 +d t + T jt + µ ijt (1) i = industry; j = variable factor; k = fixed factor; t = time. S ijt is the cost share of factor j; w ijt is the price of factor j; x ikt is fixed input or output k; z irt is technological change for proxy r. d t is time dummy; T jt factor specific time trend; µ ijt is an error term. z irt includes ICT capital stock and offshoring. We estimate the system of equations (for high, middle-high, middle-low, and low skilled workers), by Seemingly Unrelated Regression (SUR) model. Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

19 Summary Introduction Kiyota and Maruyama (2016) Conclusion... Measurement of offshoring (Feenstra and Hanson, 1999, QJE) Appendix.. S N O,it = O ii,t j=tradables M ijt, (2) where O ii,t stands for imported intermediate inputs in industry i in year t only; and M ijt is intermediate inputs from industry i to industry j in year t. Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

20 Table 5. Elasticities L H L MH L ML L L M Wage *** *** ** *** (0.218) (0.167) (0.484) (0.254) (0.011) Offshoring 0.880** (0.374) (0.298) (0.603) (0.616) (0.062) ICT capital *** *** 0.229*** (0.034) (0.027) (0.056) (0.057) (0.006). 1 The offshoring has significantly positive effects on the demand for high skilled workers. The effect of offshoring on the demand for low, middle-low, and middle-high skilled workers is insignificant. The offshoring is not harmful for workers although only high skilled workers can have benefit from it.

21 Table 5. Elasticities L H L MH L ML L L M Wage *** *** ** *** (0.218) (0.167) (0.484) (0.254) (0.011) Offshoring 0.880** (0.374) (0.298) (0.603) (0.616) (0.062) ICT capital *** *** 0.229*** (0.034) (0.027) (0.056) (0.057) (0.006). 2 The effect of the ICT capital on the demand for middle-high, middle-low, and low skilled workers is significantly positive, significantly negative, and significantly positive, respectively. ICT has different effects across skills: it complements the middle-high and low skilled workers but substitutes for the middle-low skilled workers. Industries with higher ICT stock shifted demand from middle-low skilled workers to middle-high and low skilled workers, which is consistent with ICT based job polarization (Autor, 2015, JEP).

22 Summary Major findings Industries with higher ICT stock shifted demand from middle-low to middle-high and low skilled workers. Offshoring is associated with the increasing demand for high skilled workers whereas it has insignificant effects on the demand for middle-high, middle-low, and low skilled workers. The increasing demand for low-wage part-time workers can be attributable to ICT in Japan. The offshoring is not harmful for workers although only high skilled workers can have benefit from it.

23 Summary Introduction Kiyota and Maruyama (2016) Conclusion... Appendix.. Conclusion Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

24 Conclusion What we did? This paper examines the effects of information and communication technology (ICT) and offshoring on the skill demand in Japanese manufacturing. Contribution Data This paper focuses explicitly on the demand for low-wage part-time workers (i.e., low skilled workers). Industry-level data for the period

25 Conclusion Major findings Industries with higher ICT stock shifted demand from middle-low to middle-high and low skilled workers. Offshoring is associated with the increasing demand for high skilled workers whereas it has insignificant effects on the demand for middle-high, middle-low, and low skilled workers. The increasing demand for low-wage part-time workers can be attributable to ICT in Japan. The offshoring is not harmful for workers although only high skilled workers can have benefit from it. Implications Both home and foreign countries can benefit from FDI if profits come back from foreign to home. It thus is important for China, Japan, and Korea to support profit repatriation by foreign-owned firms as well as to promote outward FDI.

26 Summary Introduction Kiyota and Maruyama (2016) Conclusion... Appendix.. Appendix Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI 6/1/ / 27

27 Table 3. Offshoring and ICT, Offshoring ICT capital Narrow Differential Broad share Both narrow and broad offshoring increased steadily from 1980 to The importance of offshoring is increasing from the mid-1980s. The share of the ICT capital stock to total capital stock increased rapidly.