What can trade mean for workers and households?

Economic theory tells us that trade can help boost employment outcomes in the long run. However, the benefits of trade are not necessarily experienced equally, and some may miss out altogether. Evidence suggests that some sectors do better than others and that the impact on labour can differ by gender, skill group, age group and part of the UK.

Some countries, such as the United States and Canada have sought to improve their understanding of the distributional impact of trade by estimating these various impacts. In recent years, the research we have done at Strathclyde, supported by our partner at the Department for International Trade, sought to replicate and extend this best practice in a UK context to gain insights into the different types of jobs that are supported by trade.

A report we published in February 2021 presented comprehensive results on this for the first time for the UK. It examined how jobs in the UK are supported by exporting activities. In particular, it investigates how these supported jobs are held within different parts of society. It looks at industry, destination country, gender, qualification, age and region to name a few dimensions.

Our report found:

• UK export production supported around 6.5 million full-time equivalent (FTE) jobs, or 23% of total UK FTE jobs, in 2016.
• Around 58% (3.8 million) of these jobs were in exporting industries (jobs supported ‘directly’ by exports) and 42% (2.7 million) were in the UK supply chain of exporting industries (jobs supported ‘indirectly’ by exports).
• The number of jobs directly and indirectly supported by exports is estimated to have increased between 2014 and 2016 by around 387,000.
• The sector whose exports support the largest number of jobs is manufacturing.
• The sectors most dependent on exports (in terms of absolute number of jobs) are the ‘Professional, scientific and technical services’ and ‘Admin and support services’ sectors.
• The country which supports the largest number of jobs in the UK is the United States (US); UK exports to the US supported directly and indirectly around 1.3 million UK jobs (or 4% of all UK FTE jobs). Over the same period, exports to the EU and the Rest of the World (RoW) supported 2.8 million and 3.7 million UK FTE jobs, respectively.
• Over a quarter of FTE jobs directly and indirectly supported by UK exports are estimated to be in London.
• Given the sectoral make up of exporting sectors, we estimate that the median wages are on average higher for both direct and indirect jobs: showing the importance of exporting for supporting high wage paying sectors.
• Our estimates suggest that men benefit disproportionately from UK exporting activity: of all the UK FTE jobs that are directly and indirectly supported by exports, 36% are held by women and 64% by men.

As with any modelling framework, there are a number of assumptions underpinning the results. The modelling relies on industry averages as we do not have enough information at the firm-level to separate exporting firms from non-exporting firms within an industry. However, evidence suggests that exporting firms are different to non-exporting firms.

On average, they have higher labour productivity and are more import intensive. This will result in the estimates of jobs supported by exports being overestimated. On average, they also pay higher wages which will result in the income supported by exports being underestimated.

Therefore, it is best practice to view these results as having moderately broad confidence intervals, rather than providing point estimates.

We provide recommendations in the report for improving the underlying data which can better account for these assumptions.

The research that we plan to undertake as part of the Centre for Inclusive Trade Policy will seek to support the development of these estimates further, and continue our work to support data producers like the Office for National Statistics in improving the underlying data used. We will be working closely with our colleagues at Sussex to utilise firm level microdata in an endeavour to improve the estimates.

Some examples of extensions include:

• Regular production, a longer time series and nowcasting, using more timeous data on economic aggregates to produce modelled results for more recent years
• Regionalisation and understanding export supply chain relationships across the UK
• A much better understanding of the impact of different types of firms (e.g. exporters versus non-exporters, large versus medium versus small, UK ownership versus non-UK ownership). This will also help with the assumptions around sector averages.
• More understanding of how exports affect different groups in the labour market (jobs by household income group, protected characteristics, zero hour contracts and so on)
  Greater knowledge of how exports impact on emissions

Most excitingly, this will lead us to produce further and updated versions of the jobs in trade database for reuse by other researchers.