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Does Globalization Lower Wages and Export Jobs?1.4.1 Answer the questions using the active vocabulary. 1. What is the main topic of the text? 2. What kinds of economies are described in the text? 3. How can you define the concept of “economic system”? 4. What are the main features of a market economy? 5. What are the two sides of a market economy? 6. Demand is the sellers’ side of the market economy, isn’t it? 7. Supply is the sellers’ side of the market economy, isn’t it? 8. What is the difference between the producer and the consumer? 9. What are the advantages of a market economy? 10. What are the disadvantages of a market economy? 11. Why is government intervention required in a market economy? 12. What is the main difference between the market economy and the planned economy? 13. Market forces are as important in the market economy as they are in the planned economy, aren’t they? 14. Why does the planned economy react slower to changes in consumer needs and fluctuating patterns of supply and demand than the market economy? 15. What two major sectors can be identified in the mixed economy? 16. What are the main features of the miõåd economy? The traditional economy It's hard to imagine our lives without coins, banknotes and credit cards. Yet for most of human history people lived without money. For thousands of years human societies had very simple economies. There were no shops, markets or traders. There were no employers, paid workers or salaries. Today, we call this kind of economy the traditional economy, and in some parts of Asia, South America and Africa this system still exists. People who live in a traditional economy don't have money because they don't need it. They live lives of subsistence. That means they hunt, gather or grow only enough food to live. There is almost no surplus in the traditional economy, and there is almost no property. Families may own simple accommodation, but land is shared by all the tribe. Economic decisions are taken according to the customs of the tribe. For example, every family may need to give some of the crops they grow to the tribal leader, but keep the rest for themselves. They don't do this because it makes economic sense. They do it because the tribe has always done it. It's simply a custom. Custom, also, decides what jobs people do in the traditional economy. People generally do the jobs that their parents and grandparents did before them. Anyway, there aren't many jobs to choose from in the traditional economy. Men are hunters, farmers or both. The woman's place is at home looking after children, cooking and home-making. This division of labour between men and women is another characteristic of the traditional economy. Whatever the work is, and whoever does it, you can be sure it's hard work. This is because traditional economies have3 almost no technology. Physical strength and knowledge of the environment are the tools for survival. Like any other economic system, the traditional economy has its benefits and drawbacks. Probably the biggest benefit is that these are peaceful societies. People consume almost everything they produce and own practically nothing. They are equally poor. For all these reasons, war is almost unknown in these societies. However, people who live in traditional societies are among the poorest people in the world. Because custom decides what people do, nothing in these societies ever changes. Because there is no technology, people depend on nature to survive. They have no protection from environmental disasters like droughts and floods. They are always in danger of hunger and disease. But the traditional economy is in danger itself. There are only a few examples left on the planet. In 100 years from now, it may have disappeared forever. Does Globalization Lower Wages and Export Jobs? Globalization—the international integration of goods, technology, labor, and capital—is everywhere to be seen. In any large city in any country, Japanese cars ply the streets, a telephone call can arrange the purchase of equities from a stock exchange half a world away, local businesses could not function without U.S. computers, and foreign nationals have taken over large segments of service industries. Over the past twenty years, foreign trade and the cross-border movement of technology, labor, and capital have been massive and irresistible. During the same period, in the advanced industrial countries, the demand for more-skilled workers has increased at the expense of less-skilled workers, and the income gap between the two groups has grown. There is no doubt that globalization has coincided with higher unemployment among the less skilled and with widening income inequality. But did it cause these phenomena, as many claim, or should we look to other factors, such as advances in technology? This paper seeks to answer that question. Basic Facts It is best to start with the facts. Are economies around the world becoming more integrated? Have increased unemployment and widening income disparity in fact coincided with increased economic integration? Global Integration The share of imports and exports in overall output provides a ready measure of the extent of the globalization of goods markets. Although foreign goods are available in every country now more than ever before, the expansion of product market integration has not been continuous over time. World trade in relation to output grew from the mid-1800s to 1913, fell from 1913 to 1950 because of the two world wars and protectionist policies implemented during the Great Depression of the 1930s, and then burgeoned after 1950. Only in the 1970s, however, did trade flows reach the same proportion of output as at the turn of the century, a result of the easing of tariffs and quotas, more efficient communications, and falling transportation costs. For many advanced economies the most important decade for globalization since World War II was the 1970s, when the ratio of trade to output rose markedly in both advanced and developing economies in the wake of the two oil shocks. In the developing countries, exposure to international trade picked up again in the late 1980s, coinciding with their movement toward trade liberalization. The rise in the ratio of exports to total output likely understates the degree of product market globalization. More and more output in the advanced economies consists of largely nontradable services: education, government, finance, insurance, real estate, and wholesale and retail trade. Perhaps it would be more accurate to measure the importance of international trade by considering merchandise exports as a share of the production of tradable goods only. This alternative measure shows a much larger role for trade. However measured, globalization has occurred and gives no sign of slowing down. Labor Market Developments An important trend in labor markets in the advanced economies has been a steady shift in demand away from the less skilled toward the more skilled. This is the case however skills are defined, whether in terms of education, experience, or job classification. This trend has produced dramatic rises in wage and income inequality between the more and the less skilled in some countries, as well as unemployment among the less skilled in other countries. In the United States, for example, wages of less-skilled workers have fallen steeply since the late 1970s relative to those of the more skilled. Between 1979 and 1988 the average wage of a college graduate relative to the average wage of a high school graduate rose by 20 percent and the average weekly earnings of males in their forties to average weekly earnings of males in their twenties rose by 25 percent. This growing inequality reverses a trend of previous decades (by some estimates going back as far as the 1910s) toward greater income equality between the more skilled and the less skilled. At the same time, the average real wage in the United States (that is, the average wage adjusted for inflation) has grown only slowly since the early 1970s and the real wage for unskilled workers has actually fallen. It has been estimated that male high school dropouts have suffered a 20 percent decline in real wages since the early 1970s. In other countries, the impact of the demand shift has been on employment rather than on income. Except in the United Kingdom, the changes in wage differentials have generally been much less marked than in the United States. Countries with smaller increases in wage inequality suffered instead from higher rates of unemployment for less-skilled workers. What explains the differences in outcomes for wages and employment across countries is differences in labor market structures. In countries with relatively flexible wages set in decentralized labor markets, such as the United States and, increasingly, the United Kingdom, the decline in relative demand for less-skilled labor has translated into lower relative wages for these workers. In contrast, in countries with relatively rigid wages set in centralized labor markets, such as France, Germany, and Italy, it has meant lower relative employment. Two other facts about these labor market trends shed some light on the impact of trade. The first is that about 70 percent of the overall shift in U.S. labor demand in manufacturing was a change in skill demands within industries, not across industries from less skill-intensive to more skill-intensive. At all levels of industrial classification, the majority of U.S. manufacturing industries during the 1980s employed relatively more high-skilled workers than in the 1970s, even though wages of these workers had risen. The second finding is that income gaps have widened in a number of developing countries as well as in the advanced economies, and evidence suggests that labor demand in developing countries has also shifted toward workers with high skill levels relative to the average. For example, research reveals that trade liberalization in Mexico in the mid-to-late 1980s led to increased relative wages of high-skilled workers. We might have expected trade liberalization to boost the demand for unskilled labor and raise unskilled wages, but in fact the opposite has happened in some developing countries.
Date: 2015-01-02; view: 922
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