Executive summary Dynamics of tradable and non-tradable employment in France

This note therefore compares jobs exposed to international (tradable jobs) competition with those not exposed to it (non-tradable jobs), both of which types are found in industry and services.

By
The 23/11/2016

It is obvious: the manufacturing industry and market services now overlap to such an extent that the traditional distinction between the secondary and tertiary sectors is increasingly less meaningful. This note therefore compares jobs exposed to international (tradable jobs) competition with those not exposed to it (non-tradable jobs), both of which types are found in industry and services.

Tradable jobs, non-tradable jobs: a simple difference

All countries have two economies. The fi rst, which is connected to the global economy, features tradable jobs. These workers contribute to producing goods and services for trade beyond borders, and are therefore in competition with workers located in other countries (software engineers, automobile workers, wine growers, etc.).

The second economy comprises non-tradable jobs that are only in direct competition with jobs located on the same territory. Most often, this type of employment is non-tradable because production must be carried out close to the benefi ciary, or even in the recipient’s presence (doctors, bakers, teachers, etc.).

Tradable activities, which may have different places of production and consumption, tend to cluster to benefit from positive externalities, while non-tradable activities remain close to consumers. By measuring their geographical distribution, we can therefore distinguish these two types of employment.

Tradable employment is a diminishing minority and increasingly tertiary

We thus observe that tradable employment is in the minority and is diminishing: in France, it dropped from 30% to 26.8% of total employment from 1999 to 2013. It is the non-tradable sector that really drives employment growth: it increased by 2.37 million units from 1999 to 2013, while the tradable sector lost 204,000 jobs. However, the productivity gains are greater in the tradable sector. Salaries are on average 25% higher than in the non-tradable sector, and increase more rapidly, with comparable qualification levels.

Lastly, workers in the tradable service sector now represent more than one in two tradable jobs (company headquarters, call centres, computer programming, hotels, etc.). However, the rise in these activities (+780,000 jobs from 1999 to 2013) benefits a limited number of employment areas (local labour markets) in France, corresponding to metropolitan zones, the Atlantic coast and the Mediterranean. Conversely, the continued drop in manufacturing employment (-755,000 jobs) is destabilizing a great number of local economies.

Tradable employment has a multiplying effect on non-tradable employment.
Although very different, tradable and non-tradable jobs are closely connected and interdependent. In particular, when companies from tradable sectors set up in a new location, they create a powerful lever to develop local non-tradable employment, because the new workers consume non-tradable goods and services. This is called a “local multiplier”.
According to our estimations, from 2004-2013, for 100 new tradable jobs in an employment area in mainland France, around 64 non-tradable jobs were created within the same zone.

Improve the productivity of non-tradable sectors to avoid greater inequalities

To remain competitive, it is in the interest of tradable companies that prices – and so salaries – remain contained within the tradable sector in order to limit an increase in the cost of inputs. However, containing prices in local shops, domestic services or administrations has the effect of compounding inequalities already perceptible between those employed in the two groups.

The best option therefore appears to be to aim for an “exit from the top”, which would start by acting on non-tradable workers’ productivity. With this approach, the cost-competitiveness of the tradable sector could be improved while containing salary differences between tradable and non-tradable jobs.

To achieve this, it remains to determine how policies to boost competitiveness within the non-tradable sector should be combined with other policies on training, innovation support and technology dissemination.

 

To order the Note in paper version, please go to the Presses des Mines website.

 

 

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