When there is an increase in firms' offshoring to foreign nations, we can expect the demand for higher-skilled labor in the home market will _____ and its relative wage will _____.
A) decrease; decrease
B) increase; increase
C) decrease; increase
D) increase; decrease

Question

Quizplus · Accepted Answer

When firms offshore to foreign nations, they often move lower-skilled jobs abroad where labor is cheaper, increasing the demand for higher-skilled labor in the home market due to the need for more complex, supervisory, or innovative roles that are harder to offshore. This increased demand for higher-skilled labor leads to an increase in its relative wage.

When There Is an Increase in Firms' Offshoring to Foreign