Abstract
The topic of this paper has been motivated by the rising unemployment rate of low-skilled relative to high-skilled labour in Switzerland. Between 1991 and 2014, Switzerland experienced the highest relative increase in the low-skilled unemployment rate among all OECD countries. A natural culprit for this development is “globalization” as indicated by some mass layoffs in Switzerland and as commonly voiced in public debates all over the world. Our analysis, which is based on panel data covering the years 1991 to 2008 and approximately 33,000 individuals employed in the Swiss manufacturing sector, does not, however, confirm this presumption. We do not find strong evidence for a positive relationship between import competition and (low-skilled) individuals’ likelihood of becoming unemployed.
Highlights
The relationship between international trade and employment has always been controversial
Mutual trade liberalization between Switzerland and other countries occurred through new membership of countries to the World Trade Organization (WTO), the European Union (EU) and the European Free Trade Association (EFTA)
If this is the case, international trade could be one reason for the increase of the relative unemployment rate for low-skilled labour described in the “Background” section
Summary
The relationship between international trade and employment has always been controversial. 10), for example, describes and discusses the development of the wages of “nonproduction” relative to “production” workers in US manufacturing from 1958 to 2006 If we interpret this ratio as the relative wage rate of high-skilled to low-skilled labour, the data clearly shows that the relative wages of unskilled labour fell considerably and constantly from 1986 to 2000. This observation has been the basis for the expanding literature on trade and the wage gap in the USA that sparked our research interest with its focus on Switzerland.
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