| Abstract: | Restructuring through foreign outsourcing, whereby greater imports of manufactured inputs substitute for blue‐collar labor, is shown to intensify when industries experience declines in sales. The magnitude of this effect was four to seven times greater in California industries experiencing a 20 percent sales decline from 1987‐1992, relative to those industries whose sales dropped by 5 percent. Foreign outsourcing explains a quarter to two‐fifths of the rise in payroll inequality between blue and white collar workers in California and perhaps five to ten percent of the rise in the remainder of the U.S. Past work linked growing inequality with foreign outsourcing and restructuring with economic downturns. Here, foreign outsourcing is used as an example of a particular efficiency augmenting measure, which occurs predominantly, though not exclusively, in troubled industries. |
