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The Effects of Globalization on the labor market
Globalization is meant to imply the increased inter-connectedness of the world nation states at an increasing pace with comparison to the last decades. It has brought about many macroeconomic effects with relation to labor markets, inflation and policy formulations. Major effects have been experiences in labor market institutions with globalization leading to a reduction in both product market and labor market regulations. It has also led to the activation of the unemployed and increased responsiveness in wages and salaries thus satisfying current supply and demand pressures. Reduction in the level of tax wedges has also been induced. The above intervention s in the labor market as a result of globalization has affected wage and employment outcomes. Earnings from labor give a representation of the main source of income to majority of the people in the developing world with greater emphasis on the poor workers who lack ownership of material assets.
Globalization has had many effects on the labor market both negative and positive effects. Globalization has affected the wage level of both the high-skilled and the low-skilled workers. This has been as a result of the abroad out-sourcing of jobs. In the recent world, technology has seen to it that radiography scans are nowadays being sent abroad for in-depth analysis. This modern advancement has an implication on the high skilled workers in that with time, they will start working on low-tech jobs in case they become more pessimistic about their employment states. With such a change in behavior, it may force the firms to embrace adoption of simpler technology in their operations. The outside options of the low-skilled workers will thus be improved to a considerable state. Globalization has also bred off shoring of business transactions and other commercial activities (Milberg &Winkler, 2009, 150). Firms which have embraced off shoring ad importation of intermediate services are experiencing a tremendous growth as compared to the firms which do not utilize business off shoring. Off shoring has also made it possible to utilize from information in linking information on measures of job turnover to the local production units.
Globalization has made it possible for the developing countries to mark an increased propensity to export and import goods and services. This has brought response into the changing world trade system in relation to the developing world. The increased trade response poses specific labor market outcomes. Technological change has affected greatly trade integration between different economies. This recent world is faced by the increased spread and revolution of micro-electronics. The information technology and communication advancements proliferations have improved on enterprises competences, functions and trade. The ICT revolution has enabled firms to accrue internal efficiencies; attain increased levels of productivity notwithstanding the shortening of geographical distance between the buyers and sellers of products.
Trade and international production networks will have effects on the labor market. The lower-skilled tasks are being moved to lower unit cost locations. This will help to increase the potential productive level gains for the industries which are located domestically. The rising trade levels will see a coincidence with the rising skills in the sector. For the cost-saving investments, there is a likelihood of increased substitution of employment between home and host locations. All these factors will have possible implication in the labor sector. One of them is that the domestic labor demand will be sensitive to domestic wages. Employment rates will see adjustments to changes in the desired labor demand with relation to output, real cost of labor and the technological advancements. The bargaining power of employees will be raised if some firms decide to exit from the market. Preferences of employees and their bargaining power will have its impacts on the wage bargains.
Globalization has affected positively on the productivity levels and growth in the developing countries. These countries have acquires greater levels of specialization in areas where they have comparative advantage over other countries. Globalization has also made the developing countries to be in a position to have a better access to foreign knowledge and skills thus a positive trend in the labor market requirements. Developing countries have been able to make use of the intermediate inputs of production produces offshore thus boosting their local productivity growth. Globalization has also accrued benefits of enhanced competitive levels in the product market.
Globalization has been associated with increased living standards. It has generated remarkable structural changes in the labor markets. The current globalization process is a major factor in dampening of wage inflation and reduces the share in labor income. Potential gains in employment from labor-market reforms have been improved by the higher wage elasticity of the demand for labor. It has also raised the potential level of volatility of workers and labor market outcomes. Developments in the labor market are becoming more closely linked with those from other countries as a result of globalization. These global factors have accrued to positive influence in domestic cost growth.
With globalization, developing countries have been able to create new opportunities in relation to work and production. This is a result of the alleviation of price distortion with regard to labor and capital. Employment has also been affected by the spillover effects of globalization on science, technology, education and training in the modern world. Globalization has increased trade flows leading to a shift in the demand for labor. This is because more workers are needed in the newly profitable sectors as opposed to low labor demand in the less profitable sectors. With a fixed supply of labor, the increased demand changes leads to wage rise in the more profitable industries.
Globalization has had negative effects on the labor market. The modern large–scale advancements in technology have reduced the demand for unskilled labor. This has stretched far beyond to the extent where even the foreign investment only caters for the highly skilled labourforce (Routledge & Cumbers 2009, 250). In most developing countries, globalization has led to increased levels of unhidden unemployment, lack of new openings for jobs and deterioration of the real wage rates. This is because of the lack and inability to adopt the new technologies. Globalization has bred structural policies and adjustments such as privatization. This is a clear implication of unemployment since introduction of privatization is followed by reduction in the demand for labor.
In most of the developing world, benefits accruing from trade liberalization will only go to the manufacturing- producing nations while the meager share will be channeled to the agriculturally productive countries.Recently, trade liberalizations employment effects are based on assumptions of flexible labor markets and employment of resources fully. In relation to the developing world, the assumptions may not hold since their labor markets experience inflexibilities as a result of structural factors. Globalization has also led to a fall in the net income by workers as a result of financial liberalization. Most countries nowadays are lowering their rates of taxes a so as to encourage foreign direct investment in relation to the high labor tax rates. This is because labor is less mobile to gain a resistance to high wages.
Work cited
Milberg, W. &Winkler, D.Globalisation, Offshoring and Economic Insecurity in Industrialized Countries. New York: United Nations, Department of Economic and Social Affairs.2009.
Standing.G. Work after Globalization: Building Occupational Citizenship. Cheltenham: Edward Elgar. 2009.
Routledge, P. &Cumberss, A. Global Justice Networks: Geographies of Transnational Solidarity. Manchester: Manchester University Press.2009.
