International Competition Intensified – Job Satisfaction Sacrificed?

There has been an intense debate as to the effects of offshoring and global value chains on labor, with the debate centering around possible employment and income effects. In particular, the low(er) skilled workforce in advanced economies is considered to be negatively affected - to the effect of a widening in the income distribution. Even though there is indication that technical advancements contributed to income inequality as well, the nature of those advancements and their bias as to skills and occupations may at least to some extent be induced by trade and offshoring of intermediates production. While especially the economic focus has been on income effects, sociological and psychological research has shown that on a general account income falls far too short when it comes to subjective well-being. Accordingly, subjective well-being is multidimensional as it is made up of many aspects in life and work, and, beyond a certain income level, not necessarily or primarily driven by income. Yet, these findings have not gained the attention they deserve when exploring the impact of offshoring on labor. Apart from the fear of job loss and a recent study focusing on Finish specificities, the globalization's impact on perceptions and subjective wellbeing has been surprisingly under-researched. This applies in particular to job satisfaction, including the job satisfaction of those negatively affected by seeing their incomes depressed. This paper thus opens up new perspectives on the globalization's effect on labor by focusing on a less explored issue. Our approach is novel in two respects. First, we develop a model that is capable of capturing job satisfaction in conjunction with the income and distributional effects of offshoring and the globalization of production. Contrary to a great many beliefs, these theoretical considerations suggest that even those remaining employed but suffering from increasing competition from abroad and from more tasks being offshored may be more satisfied with their jobs. Second, we take our theoretical results to the data. As to our main variables, job satisfaction and offshoring activities, we use information from the International Social Survey Program (ISSP) and the European input-output database respectively. And, we tap the Penn World Tables and the World Bank's WDI in an attempt to control for variables other than offshoring that might influence job satisfaction. Running a cross section logistic regression model that combines this information, lends support to our theoretical results. Accordingly, job satisfaction is on average rated higher in countries with comparatively high offshoring activities. Additional (even more disaggregated) regressions get to the heart of the matter, which is a change in the characteristics of the remaining jobs that is associated with higher job satisfaction. Our results stand up to extensive robustness checks with respect to different specifications, regression methods, and measures of the globalization of production, and even when controlling for many variables.