Globalization is a large-scale economic, cultural, social and technological process that consists of the growing interdependence between the different countries of the world uniting their societies, markets and cultures. Technological revolution, which transforms industrial society into a connected society, made the globalization possible. However, there are also other types of factors, especially demographic and social, that drive the process. We are not facing a strictly economic phenomenon, although, of course, the impact on trade relations and on the distribution of economic power in the world are extremely affected. The economies of the vast majority of countries are already interconnected in some way. It is what we call globalization.
In recent decades, the globalization of the economy, technological changes and the processes of liberalization, privatization and deregulation that cover almost all the countries in the world, have affected the framework of labor relations by affecting employment and wages. This makes it necessary to incorporate profound modifications in the institutional framework that regulates labor relations in order to provide them with greater flexibility and adapt them to the conditions of the environment.
The World Trade Organization (WTO) explains that the increasing integration of countries in world trade and the rapid pace of technological change have helped to improve the standard of living of billions of people around the planet, but that This progress has also had an impact on the labor market and has brought with it the growth and decline of certain sectors.
Thus, employment has become one of the greatest challenges facing various regions of the world, both in developed and developing countries. This challenge, however, does not present itself in the same way in all economies. On one side, The United States has had relatively low unemployment rates for a decade, accompanied by slow wage growth, falling real wages for the least-skilled workers, and growing disparity in the income levels of different strata of the population, which it is partly explained by a greater wage differentiation.
In the European Union, the greatest labor challenge refers to the high and prolonged unemployment, which particularly affects low-skilled workers. In Latin America, the labor market is distinguished by the high proportion of those employed in the informal sector, where precarious, low-income jobs prevail and without access to social security, which generates enormous disparities in income and wages.
Muhammad M. Rashid, a researcher, scholar and alumnus affiliated with the University of Detroit Mercy and University of California of Davis, elaborates more about the impact of globalization on labor markets in advanced industrial nations and developing nations through his paper.
“The rate of globalization has increased at a phenomenal rate. During the past 50 years we have seen many governments that have progressively eliminated policy barriers to trade. The elimination of these barriers to has led to a decrease in both the transportation cost and the telecommunication cost.”
The most dynamic companies in this increasingly integrated market tend to use smaller, more flexible and autonomous production units, more specialized in certain specific functions, and outsource much of the work they have to do with other companies. For workers or employees in high-tech sectors, especially in industrialized countries, this change can mean better working and income conditions. But it also allows many larger companies to renounce their social obligations to their workforce, in addition to transferring the economic risk to smaller companies. This flexible specialization allows a faster response to changing market conditions,
Equally negative is the fact that these working methods have weakened the relationship between output expansion and employment growth, resulting in growth with little or no job supply. Therefore, even when moving from a recession to a period of high growth, the job offer may not increase significantly. This more flexible scope of labor use also implies a trend towards part-time and insecure employment, a trend that is still increasing in developed countries.
Impact of Globalization on Advanced Industrial Countries
Globalization offers great opportunities for truly global development, but it is not progressing smoothly. Some countries are integrating into the world economy faster than others.
Muhammad M. Rashid enlightens further; when we analyze labor compensation as compared to reduction in wage share, we find a considerable increase occurring from the 1980’s and a much more accelerated increase that occurred from the 1990’s.
Having vast experiences in international trade of textiles, international development and research experiences with the University of California, and being an advanced researcher in Finance and political economy, M. Rashid gives sufficient evidence of the impact on labor markets due to globalization on one of this research papers. His extremely diverse knowledge and vast experience allow him to raise such topics with proven stats. Many scholars and researchers admire Rashid’s work.
He has nearly 12 published papers on the internet recognized by several political and economic researchers. Rashid is included in Marquis Who’s Who, a platform that includes profiles on the basis of the current reference value, noteworthy accomplishments, visibility, and prominence in a field.
Bottom Line
Taking these types of measures translates into greater limitations towards economic efficiency – in the presence of mobility costs, governments should facilitate the adjustment produced by globalization and accelerate the transition towards an efficient allocation of resources.
On the other hand, the arguments in favor of the fact that the market in terms of equity is not affected is that, although all consumers benefit from international trade through lower prices, a small number of workers bear the cost. The argument for political support states that governments should compensate those who are adversely affected by their own actions. For example, if reducing tariffs results in job losses and governments do nothing about it, public support for further reduction in tariffs is likely to be low. In short, it is the eternal debate with the consequences of the actions of governments despite their efficiency.