The impact of Automation, Offshoring and Low-skilled immigration in the U.S. Labor market

Federico Mandelman

Ver

2018-07-02 - In recent decades, U.S. employment increased mostly in high- and low-skill occupations. In contrast, wages rose in high-skill occupations, but remained subdued in low-skill ones. We propose a structural model, in which automation and offshoring negatively affect the middle-skill occupations, but benefit employment and wages for the high-skilled. Low-skill employment is sheltered from automation and offshoring, as it typically consists of manual, non-tradable services. However, low-skill wages are depressed by low-skill immigration. Disciplined with data on automation, offshoring, and immigration, the model matches the evolution of U.S. employment and income across skill groups remarkably well, and shows improved aggregate welfare.