Offshoring and Employment in Canada: Some Basic Facts

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Executive summary

Using a wide variety of data sources, we present a set of stylized facts regarding offshoring and the evolution of employment in Canada in recent years. Our main findings are the following:

Up until 2004, Canada's imports of computer, information and other business services from countries who are not members of the Organisation for Economic Co-operation and Development represented fairly small amounts and thus, were unlikely to be associated with substantial job losses.

Throughout the 1996-to-2004 period, Canada's exports of these commercial services to countries who are not members of the Organisation for Economic Co-operation and Development exceeded its imports, thereby indicating that while some Canadian firms are increasingly involved in foreign outsourcing, others are also benefiting from foreign insourcing.

About 20% of Canadian jobs were potentially subject to service offshoring in 2006. Women are found in these jobs more often than men. The jobs most likely to be affected by service offshoring are found in high-skill services.

While employment in clerical occupations potentially affected by service offshoring fell by 138,000 between 1987 and 2006, most of the decline in employment either: a) occurred too early to be caused by service offshoring, or b) took place outside of the commercial sector, where service offshoring is unlikely to have been important so far.

There is no evidence that industries with a relatively large share of occupations subject to service offshoring in 1994 to 1995 saw their employment growth decelerate relative to other industries between the 1987-to-1995 and the 1996-to-2006 periods.

There is little evidence that occupations potentially affected by service offshoring have displayed smaller employment growth in industries that experienced substantial increases in imports of computer, information and other business services from countries who are not members of the Organisation for Economic Co-operation and Development than similar occupations located in other industries. A negative and significant relationship between employment growth and growth in these imports coming from countries who are not members of the Organisation for Economic Co-operation and Development is observed only for professional occupations potentially affected by service offshoring and when using a 3-digit industry classification. However, since these results are based on a fairly small number of industries, they must be interpreted with a great deal of caution.

The evolution of layoff rates by occupation provides, so far, no clear signal of a link between service offshoring and job loss.

After controlling for industry-specific fixed effects, manufacturing industries that experienced strong growth in offshoring (as measured by increases in the share of intermediate goods and services that they imported) during the 1983-to-1989 and the 1994-to-2000 periods did not experience employment growth rates that differed relative to those of other industries.

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