Jobs for the Skilled: How Technology, Trade and Domestic Demand Changed the Structure of UK Employment, 1979-90

Abstract

This paper investigates the effects of trade, technological change and final demand growth on the skill structure of UK employment. A new method is developed, using a multi-sector framework, which combines a decomposition of the growth of gross output by sector with factor content of trade analysis. This allocates the changing use of skills among final demand growth, trade and technological change. The skills content of intermediate and capital goods purchased by each sector is captured through input-output data. Technological change is measured through the changing use of labour, within the sector and in its purchased inputs. Three skill levels, low, intermediate and high, are identified from detailed occupations.

The method is applied to UK employment 1979-90. Two large opposing developments dominate the employment record: employment creation from domestic demand, and labour-saving technological change. Both show marked skill-bias. The effects of trade are found to be small, but favouring skills. The services sector plays a striking role in generating high-skilled even more than low-skilled jobs, and in generating new employment through supply chains. It is the only sector to expand its labour use over the period.

Keywords: skills, trade and technological change, input-output, factor content of trade, service sector

JEL Classification: F4, F1, J0, O3, O4