Offshoring and Its Impact on V4 Labor Market: The Urgent Need for Upskilling and Competence Adaptation

Over the past 20 years, production processes have become more fragmented, with various stages offshored to different locations, impacting international and domestic labor markets. CEE countries have become key offshoring destinations due to their skilled labor and competitive costs. This study aims to assess how shifts in international production affect labor markets in the V4 countries. We estimate a system of employment-share equations derived from a translog cost function, incorporating offshoring and domestic outsourcing, using the SUR method. Our findings suggest that offshoring negatively impacts employment for less-skilled occupations, while its effect on high-skilled jobs is insignificant. Thus, the need for continuous training and upskilling of the workforce to maintain competitiveness is highlighted by our findings.