Chinese imports to turn Finland’s labour market upside down
Chinese imports are increasing the likelihood of job loss or separation from employers in Finland, research by VATT reveals.
Growth in Chinese imports is polarizing Finnish employment and wages since the greatest risk of job loss or a decline in wage income is faced by medium-skilled production workers. Increased Chinese imports also entail an increased risk of loss of employment for highly skilled employees, but higher wages.
A recent study by VATT provides detailed information on the effects of growing Chinese imports on workers in Finland. The research material covers all industrial firms in Finland. As regards imports, both imports of final products and intermediates are investigated. By importing intermediates from China, companies transfer their own production to China or replace domestically produced intermediates with Chinese products.
The study shows that both forms of imports increase the likelihood of job loss or separation from employers in Finland.
Increased imports of Chinese final products has more negative effects on employment in Finnish industrial firms than increased imports of Chinese intermediates. Doubling the mean level of final product imports increases employees’ risk of job loss by 13.5% within two years, while the same relative increase in imports of intermediates increases the risk of job loss by 4.8% within two years.
The impact of Chinese imports does not interact exactly with educational level or occupational groups. Import growth increases the risk of job loss especially for medium-skilled production workers. Their new employment prospects are also impaired. Highly skilled workers come off best from the upset to Finland’s labour market from Chinese imports. They find new employment, since despite the increased risk of job loss their overall employment barely declines.
The research findings indicate that Chinese import growth may have contributed to the polarization of employment in Finland. Besides employment, import competition also polarizes the wages of industrial workers in Finland. Import competition has a positive impact on the annual and hourly earnings of highly skilled workers, whereas the impact on the wages of other workers is negative. The greatest income losses are faced by medium-skilled production workers, who also face the highest risk of losing their job.
The extensive research material covers all industrial firms in Finland and their workers. This is important as it provides a control group between those firms with imports from China, those with very little or none at all. Chronologically, the study covers the years 1998–2009. The material was assembled by combining foreign trade data from the Finnish Customs with Finnish employee and employer statistics. The study also uses detailed information on intermediates used, industrial employment and wages.
“It’s important for Finnish firms to see Chinese imports as an opportunity to maintain high competitiveness. By transferring to China the sort of production that is not profitable here, we can increase the productivity of the production that remains in Finland – and thereby remain competitive in competition for final products”, says senior researcher Katariina Nilsson Hakkala.
Worker-level consequences of import shocks
VATT Working Papers 74, 2016.
Katariina Nilsson Hakkala, Senior Researcher
Business regulation and international economics