1. Marta Solaz, Francisco Pérez and Eva Benages
Employment and occupations in manufacturing Global Value Chains (GVCs): an analysis of European countries
Marta Solaz, Francisco Pérez and Eva Benages
Fifth World KLEMS Conference
June 4-5, 2018
Harvard University
Occupations in global value chain: an analysis of European countries

2. Motivation
The emergence of global value chains (GVCs) has led to a decline in the domestic value added (VA) content of countries’ final manufacturing production:
Important differences among EU countries (ranging from 40% to 72% in 2014).
What are the implications for employment?
The share of domestic jobs over total GVC jobs shows greater differences among countries (ranging from 30% to 90%).
In several countries, the decline in domestic employment has been larger than in VA.
Figure 1. Domestic value added and jobs in EU countries’ manufacturing GVCs,
(percentage)
a) Value added
b) Jobs
We observe a decline in the share of domestic VA over total VA in manufacturing GVCs in almost all EU countries during the reference period, although there are important differences among EU countries, ranging from 40% to 75%.
Source: authors’ calculations based on WIOD (2016)

3. Motivation
VA in manufacturing GVCs has increased (domestic and foreign), whereas the number of jobs have decreased in most European countries.
Domestic jobs in manufacturing GVCs of European countries have decreased, whereas the amount of foreign workers has increased in many countries.
c) Jobs: domestic and foreign
b) Value added: domestic and foreign
Figure 2. Changes in value added and jobs in EU countries’ manufacturing GVCs, (annual percentage change)
Source: authors’ calculations based on WIOD (2016)
a) Value added and jobs

4. Objectives
We analyse the trends in the employment and occupational content embodied in manufacturing GVCs (GVC Jobs):
Jobs that are directly and indirectly involved in the production of a given country- sector (Timmer, Stehrer & de Vries (2013), Timmer et al. (2014)).
We focus on the big five European countries (Germany, France, Italy, UK and Spain).
The analysis covers the period ( when we distinguish employment by occupations).

5. Research questions
How the employment in GVCs and its occupational content are evolving?
Are there any differences in the employment and its occupational content in GVCs…
across countries and sectors?
between domestic and foreign workers?
Is there upgrading in the occupational content of employment in GVCs (domestic and foreign)?
Upgrading: changes in the occupational content of employment towards higher-skilled occupations and activities (Humphrey & Schmitz, 2002).

6. Related literature Relevant extension of GVC analysis:
Estimates of the domestic VA content of production and trade; countries’ participation in GVCs: Daudin, Rifflart & Schweisguth (2011), Johnson & Noguera (2012), Baldwin & Lopez-Gonzalez (2013, 2015), Johnson (2014), Koopman, Wang & Wei (2014).
Factor content of production and trade: Trefler & Zhu (2010), Timmer, Stehrer & de Vries (2013); Timmer et al. (2014).
Skill content, upgrading and job polarization:
De Vries et al. (2016), de Vries and Miroudot (2016), Reijnders & de Vries (2017), Marcolin, Miroudot & Squicciarini (2016).
This analysis is a relevant extension of the literature of GVC analysis.

7. Methodology
The fundamental input-output identity (Leontief, 1936):
𝑥=( 𝐼−𝐴) −1 𝑦
reflects the output needed (𝑥 ) to satisfy a certain level of final demand (𝑦).
With N countries and S sectors, this equation can be expanded into an inter-regional input-output model:
𝐗=𝐁𝐘
where X is the output decomposition matrix, B is the Leontief inverse or total requeriment matrix, Y is the final demand matrix.
The value added embodied in production flows can be derived by pre-multiplying by 𝑉 , a matrix with value-added ratios to gross output in the main diagonal:
𝐕 𝐗= 𝐕 𝐁𝐘
𝐕 𝐁𝐘 is the value-added production matrix.
We replace the value-added matrix 𝑉 by the employment requeriments per dollar of production ( 𝐿 ):
𝐋 𝐗= 𝐋 𝐁𝐘

8. Methodology
𝐋 𝐁𝐘 gives the total amount of workers employed to satisfy a given level of final demand.
Data on employment requirements can be decomposed into workers by occupations ( 𝐿 𝐺 ):
𝐿 𝐺1 0 … 𝐿 𝐺2 … 0 ⋮ ⋮ ⋱ ⋮ 0 0 ⋯ 𝐿 𝐺𝑁 𝑋 11 𝑋 12 … 𝑋 1𝑁 𝑋 21 𝑋 22 … 𝑋 2𝑁 ⋮ ⋮ ⋱ ⋮ 𝑋 𝑁1 𝑋 𝑁2 ⋯ 𝑋 𝑁𝑁 = 𝐿 𝐺1 𝑗 𝑁 𝐵 1𝑗 𝑌 𝑗1 𝐿 𝐺1 𝑗 𝑁 𝐵 1𝑗 𝑌 𝑗2 … 𝐿 𝐺1 𝑗 𝑁 𝐵 1𝑗 𝑌 𝑗𝑁 𝐿 𝐺2 𝑗 𝑁 𝐵 2𝑗 𝑌 𝑗1 𝐿 𝐺2 𝑗 𝑁 𝐵 2𝑗 𝑌 𝑗2 … 𝐿 𝐺2 𝑗 𝑁 𝐵 2𝑗 𝑌 𝑗𝑁 … … ⋱ … 𝐿 𝐺𝑁 𝑗 𝑁 𝐵 𝑁𝑗 𝑌 𝑗1 𝐿 𝐺𝑁 𝑗 𝑁 𝐵 𝑁𝑗 𝑌 𝑗2 … 𝐿 𝐺𝑁 𝑗 𝑁 𝐵 𝑁𝑗 𝑌 𝑗𝑁
where 𝐿 𝐺 is a matrix with occupational requeriments per dollar of production.
We consider 9 different 𝐿 𝐺 matrices, one for each type of occupation (G=1,…,9).
𝐋 𝐆 𝐗= 𝐋 𝐆 𝐁𝐘 gives the total amount of workers by occupations employed to satisfy a given level of final demand.
How much domestic value added a country generates by participating in GVCs. In the same vein, we can obtain how many jobs are created by participating in GVC. We can distinguish these jobs by occupations. Some occupations are more qualified than others. By looking at the occupational composition of countries’ production and exports, we can assess if countries’ have been upgrading their position in GVCs.

9. Methodology
We calculate the number of workers by occupations employed in each manufacturing GVC.
532 GVCs for each year (19 manufacturing sectors x 28 European countries), from 2000 to 2014 ( in the case of occupations).
Results for the whole manufacturing sector and for the EU-28 are obtained by aggregating the data.
Total jobs (directly and indirectly) involved in the GVC of a given country-sector are attributed to:
Countries that participate (N)
Industries (S)
Workers by occupation (G)

10. Data
International input-output tables from the World Input-Output database (WIOD, 2016 Release).
Data on employment by occupations and economic activity is obtained from Eurostat Labour Force Survey (LFS).
National industry classifications are mapped to the 56 industries in WIOD.
9 occupations (1 digit ISCO08).
We aggregate them into 3 groups by skill type following ILO (2012):
ISCO08
Name
Qualification
OC1
Managers
High-skilled
OC2
Professionals
OC3
Technicians and Associate Professionals
OC4
Clerical Support Workers
Medium-skilled
OC5
Services and Sales Workers
OC6
Skilled Agricultural, Forestry and Fishery Workers
OC7
Craft and Related Trades Workers
OC8
Plant and Machine Operators and Assemblers
OC9
Elementary Occupations
Low-skilled
Se puede mencionar que otros papers usan otras clasificaciones (routine, non-routine), otra clasificación de niveles como la de Reijnders y de Vries (2017)
We calculate the occupation shares for each country, industry and year.
These shares are applied to data on employment from WIOD Socio Economic Accounts (SEA), which we use as a benchmark.

11. Jobs in EU countries’ manufacturing GVCs
Domestic jobs in EU countries’ manufacturing GVCs have decreased.
Employment from outside the EU has increased in the EU-28, Spain, Germany and France.
Figure 3. Jobs in EU countries’ manufacturing GVCs, (number of persons in thousands)
Source: authors’ calculations based on WIOD (2016)

12. Jobs in EU countries’ manufacturing GVCs
From 2000 to 2014, the share of domestic jobs has decreased, and the importance of jobs coming from EU and especially non-EU countries has increased.
Figure 4. Jobs by origin in the manufacturing GVCs of selected EU countries (percentage)
Source: authors’ calculations based on WIOD (2016)

13. Jobs in EU countries’ manufacturing GVCs
Domestic jobs have decreased in almost all manufacturing sectors, whereas the amount of foreign workers has increased, especially in Spain and Germany.
Substantial heterogeneity across sectors and countries in terms of employment variations.
Figure 5. Jobs by origin in the manufacturing GVCs of selected EU countries, (annual percentage change)
a) Spain
b) Germany
c) France
d) Italy
e) United Kingdom
Source: authors’ calculations based on WIOD (2016)

14. Occupations in manufacturing GVCs: domestic vs. rest of Europe
High-skilled (HS) occupations account for a larger share among foreign European workers in the case of Spain, and to a lesser extent, in Germany and Italy in 2014.
The share of HS workers is higher for domestic workers in France and UK, increasing between 2008 and 2014, while in Spain, Germany and Italy, it has decreased.
Figure 6. Jobs by occupations in the manufacturing GVCs of selected EU countries, (percentage)
a) Spain
b) Germany
c) France
d) Italy
e) United Kingdom
Note: “Rest of Europe” includes other EU-28 countries, Norway and Switzerland.
Source: authors’ calculations based on WIOD (2016) and Eurostat LFS (2018)

15. High-skilled occupations in manufacturing GVCs
There are important differences in the share of HS occupations across sectors and countries.
In Spain, HS occupations account for a larger share among foreign European workers compared with domestic workers in almost all sectors. Germany and Italy are in an intermediate situation.
On the contrary, in France and UK, almost all sectors exhibit a higher share of HS occupations among domestic workers.
Table 1. High-skilled occupations in the manufacturing GVCs of selected EU countries, 2014 (percentage)
Spain
Germany
Italy
France
United Kingdom
DOM
Rest EUR
Food products, beverages and tobacco products
C10-C12
20,9
23,2
21,9
26,1
23,3
28,0
29,5
31,3
29,8
Textiles, wearing apparel and leather products
C13-C15
21,4
27,8
30,6
26,6
29,2
37,0
28,5
36,8
32,2
Wood and of products of wood and cork, except furniture
C16
22,8
31,7
28,6
30,0
23,7
28,9
30,9
29,3
Paper and paper products
C17
33,1
28,1
34,9
34,4
37,4
32,3
38,3
35,0
Printing and reproduction of recorded media
C18
33,7
33,9
24,9
35,7
35,3
39,3
34,3
38,6
35,1
Coke and refined petroleum products
C19
39,8
40,5
47,2
38,5
42,7
46,0
42,6
50,5
44,6
Chemicals and chemical products
C20
36,6
39,6
37,1
38,0
49,7
46,4
Basic pharmaceutical products and pharmaceutical preparations
C21
44,5
45,0
40,4
49,5
41,1
56,6
58,8
40,3
Rubber and plastic products
C22
36,7
31,0
35,6
41,4
36,2
Other non-metallic mineral products
C23
27,0
39,0
38,2
34,6
36,9
36,5
Basic metals
C24
28,3
29,4
34,7
44,4
34,5
Fabricated metal products, except machinery and equipment
C25
22,7
25,3
34,2
26,8
33,8
41,0
33,0
39,7
34,0
Computer, electronic and optical products
C26
37,6
44,0
46,1
38,1
55,8
35,5
60,0
Electrical equipment
C27
35,4
35,2
36,0
46,5
47,3
Machinery and equipment n.e.c.
C28
37,2
44,3
34,1
42,3
Motor vehicles, trailers and semi-trailers
C29
33,3
33,6
38,4
Other transport equipment
C30
51,9
49,6
Furniture; other manufacturing
C31_C32
27,6
32,8
40,0
32,9
31,2
43,0
Repair and installation of machinery and equipment
C33
36,1
45,7
Total manufacturing
MAN
26,4
31,5
32,1
Note: “Rest EUR” includes other EU-28 countries, Norway and Switzerland.
Source: authors’ calculations based on WIOD (2016) and Eurostat LFS (2018)

16. High-skilled occupations in GVCs: evidence of upgrading?
For the whole manufacturing sector, there is upgrading (domestic and foreign) in France and UK. Spain shows the opposite pattern. In Germany and Italy, the importance of HS occupations among foreign European workers has increased, whereas the share of domestic HS occupations has decreased.
There is domestic upgrading during the period in many sectors in Spain, France, Italy and United Kingdom, but not in Germany.
Upgrading has been more general in foreign European jobs.
Table 2. High-skilled occupations in the manufacturing GVCs of selected EU countries. Change over (pp.)
Spain
Germany
Italy
France
United Kingdom
DOM
Rest EUR
Food products, beverages and tobacco products
C10-C12
-2,1
-5,2
-0,3
-2,4
-9,3
-1,9
2,9
-1,3
-0,8
Textiles, wearing apparel and leather products
C13-C15
-3,3
-3,8
-3,0
2,0
-2,2
-0,1
1,8
-0,5
1,0
1,2
Wood and of products of wood and cork, except furniture
C16
0,5
0,6
0,7
0,9
3,7
1,5
0,8
Paper and paper products
C17
-0,6
-1,1
-1,5
2,8
2,2
Printing and reproduction of recorded media
C18
-2,8
-0,7
-2,3
1,7
-7,6
6,8
Coke and refined petroleum products
C19
8,6
3,5
10,0
0,0
6,7
5,6
4,4
5,8
Chemicals and chemical products
C20
1,4
-1,4
5,3
Basic pharmaceutical products and pharmaceutical preparations
C21
-4,0
0,1
-1,0
8,2
Rubber and plastic products
C22
1,1
6,2
3,2
Other non-metallic mineral products
C23
-0,2
3,4
-0,4
2,3
6,9
1,3
2,4
Basic metals
C24
4,2
-1,6
2,1
6,1
Fabricated metal products, except machinery and equipment
C25
1,9
9,9
3,8
Computer, electronic and optical products
C26
0,3
0,4
-0,9
-1,7
12,9
Electrical equipment
C27
-3,7
7,3
Machinery and equipment n.e.c.
C28
6,0
1,6
2,7
Motor vehicles, trailers and semi-trailers
C29
-2,9
0,2
Other transport equipment
C30
3,0
5,1
Furniture; other manufacturing
C31_C32
11,6
-1,8
3,6
2,5
Repair and installation of machinery and equipment
C33
-4,2
-6,8
8,8
Total manufacturing
MAN
-1,2
Note: “Rest EUR” includes other EU-28 countries, Norway and Switzerland.
Source: authors’ calculations based on WIOD (2016) and Eurostat LFS (2018)

17. Looking into high-skilled occupations
The decrease in domestic HS occupations in Spain, Germany and Italy can be attributed to decreases in the share of managerial workers. Professional workers exhibit increases in these countries, although they do not compensate that decrease.
In UK, the decline in managerial workers is more than compensated by the large increase in professional workers (8,5pp).
In France, domestic upgrading is related to the increasing importance of technicians and associate professionals (OC3).
Figure 7. High-skilled occupations in the manufacturing GVCs of selected EU countries (percentage)
a) Spain
b) Germany
c) France
d) Italy
e) United Kingdom
Note: “Rest of Europe” includes other EU-28 countries, Norway and Switzerland.
Source: authors’ calculations based on WIOD (2016) and Eurostat LFS (2018)

18. Concluding remarks Trends in employment embodied in GVCs:
The importance of manufacturing production for employment is decreasing in EU countries.
Decreases in the amount of domestic workers involved in each country’s manufacturing GVCs, which are pervasive across the GVC of almost all manufacturing sectors.
Integration in GVCs is progressing: the importance of foreign workers (from other EU and non-EU countries) has increased, particularly from non-EU countries.
Occupations in GVC Jobs:
Important differences in the share of HS occupations across sectors, and within the same sector by countries.
In Spain, Germany and Italy, the share of HS occupations is higher among foreign European workers. In France and UK, the situation is the opposite.
These differences at country-level are also found in many manufacturing sectors.
Upgrading among workers from other European countries has taken place in almost all sectors.
In Spain, Germany, Italy and UK, upgrading among domestic workers has been driven by professional occupations.

19. Implications and future extensions
Generating good jobs in GVCs is a major concern.
Higher value added activities.
High-skilled jobs are less likely to be affected by automation.
When working with European countries, no evidence that the foreign content embodied in the big five EU countries’ GVCs is composed of lower-skilled tasks.
Future research:
How would these results change if all countries included in WIOD were considered?
Which is the trend for the period ?
Which is the evolution of countries’ participation in GVCs in terms of labour compensation?

20. Marta Solaz, Francisco Pérez and Eva Benages
Employment and occupations in manufacturing global value chains (GVCs): an analysis of European countries
Marta Solaz, Francisco Pérez and Eva Benages
Fifth World KLEMS Conference
June 4-5, 2018
Harvard University
Occupations in global value chain: an analysis of European countries

21. Appendix. Structure of GVCs by occupations
Country 1
Country 2
Country N
GVC1 …
GVCv
Jobs from each country-industry
Industry 1
 Ocup1
 Ocup2
 Ocup3
Ocup9
Industry S  …
Total jobs by occupations employed in each GVC