An increase in offshoring will lead to:
A) an increase in the relative demand (and hence relative wage) for low-skilled labor.
B) no change in the relative demand (and hence relative wage) for low-skilled labor.
C) an increase in the relative demand (and hence relative wage) for high-skilled labor.
D) an increase in the relative demand (and hence relative wage) for mid-level workers.

Question

Quizplus · Accepted Answer

Offshoring typically involves relocating low-skilled jobs to countries with lower labor costs. This leads to a decrease in the demand (and hence wage) for low-skilled workers in the home country. However, as firms offshore low-skill tasks, they can focus on the more complex and high-skill tasks that cannot be easily offshored. This leads to an increase in the demand (and hence wage) for high-skilled workers in the home country. Therefore, offshoring leads to an increase in the relative demand (and hence relative wage) for high-skilled labor.

An Increase in Offshoring Will Lead To