The Impacts of Offshoring of Temporary Workers : Evidence on Wages from South Korea

The trade literature has found that the impacts of globalization on the domestic labor market are dependent on, among other factors, the sourcing country s income level, the education level of the domestic workers, and the occupations involved. This paper investigates another factor that might determine the effects of globalization on the domestic labor market, the worker s contract type (i.e. permanent vs. temporary contract). We pay particular attention to wages and examine whether the contract type influences the impacts of offshoring. Individual-level employment data from the South Korean labor panel (SKLP), linked to industry-level offshoring data from the World Input Output Database (WIOD) are used to answer this question. Even after controlling for skill, employer characteristics, industry, and occupation, we find that South Korean workers wages increase as offshoring to OECD countries increases, but this impact is significantly weaker for temporary workers. Moreover, offshoring to non-OECD countries actually reduces the wages of temporary workers. Further analysis reveals that temporary workers face lower wages because they are more likely to be reallocated to other industries. Thus, our finding supports public concern regarding globalization, especially from temporary workers in South Korea.