Globalization and Labor Market

Introduction

The formation and development of the global labor market require an analysis in terms of globalization’s macroeconomic realities. Globalization can be perceived as a negative trend due to its particular consequences. It results in migration processes, accessibility, and permeability of markets in various countries. However, these days this process is accompanied by other tendencies, such as technological change, deindustrialization, and the increasing automation of industrial production. Even though it is difficult to determine whether globalization consequences have the most adverse outcomes for the labor market, other processes’ effects differ from the impact of the fusion of labor markets.

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Economic Globalization

One of the principal processes in developing the world economy in 20 and 21st centuries is progressive globalization. It is considered a new stage in the evolution of the internationalization of economic life. The consequences of such processes can be recognized as positive and negative; however, it is inevitable. As a result of international cooperation of production, the development of the global division of labor, foreign trade and worldwide economic relations in general, there is an increase in the interconnection and interdependence of national economies.

International economic cooperation means expanding stable economic relations between countries and peoples, establishing the reproduction process beyond national borders. Its normal development is impossible without considering the external factor. For instance, North nations have intensified their attempts to build an international market through regional and global trade-liberalization agreements such as NAFTA and GATT (Steger, 2009). International financial markets, exceeding the growth of exports and world production in their development, have become a powerful globalization circumstance.

The world economy was formed according to the increasing speculative capital impact at the end of the 20th century. It does not ensure the reproduction process, having the necessary freedom and sufficient mobility (Steger, 2009). Expansion of the credit allowed for the growth of the production apparatus and a further increase in commodity production beyond market participants’ financial capabilities (Steger, 2009). Simultaneously, it served to maximize trade operations volume while provoking an increase in commodity prices, which did not reflect the actual balance of supply and demand (Steger, 2009). According to Steger (2009), during the 1990s, the Internet invention stimulated financial transactions’ liberalization. For instance, in 2005, these new technologies could trade about 10 trillion dollars in the US (Steger, 2009). Thus, economic globalization has appeared due to the internationalization of capital.

Scientific and technological progress and an increase in the degree of openness of national economies and trade freedom also stimulate globalization. Economic integration, in particular, is displayed in cooperation between the national economies of different countries and their complete or partial unification. Globalization is characterized by eliminating barriers to the movement of goods, services, capital, and labor between these states and the convergence of each country’s economics to form one single market (Steger, 2009). Overall, the differences between business entities of states are erased.

Labor Market Globalization

The formation of a globalized labor market was caused by the increased export and import of international labor. Furthermore, the development of democracy in North countries has led to the right to participate in political processes in the 20th century (McLaren, 2017). According to McLaren (2017), the average immigrant begins a career with activities that do not require high professional qualifications and education. Despite the fact that there are particular economic benefits from migration, low-skilled workers may lose from increased labor market competition.

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In the global economy, a fundamental circumstance for developing the economy and the movement of capital and goods is employee turnover. These days, migration processes are an integral part of both North and South countries’ economic life (McLaren, 2017). In the past decade, the number of people working overseas has increased by 6 million per year, which exceeds the world’s population growth rate (McLaren, 2017). With regard to immigration, it is a rather complex and multifaceted picture, which consists of many flows being different in scale, quality characteristics and direction (McLaren, 2017). These courses’ primary focus has been on the human resources drain from developing countries to advanced economies.

The main reasons are the world’s demographic situation and the growing income gap between these states. For instance, 97% of the world’s annual population increase occurs in developing countries (McLaren, 2017). At the same time, there is a low birth rate in industrialized nations and a rapid rise in retirement-age people (McLaren, 2017). Therefore, people from developing countries tend to move to Europe and North America to get wages. It benefits the countries of origin as unskilled labor migration has the highest potential to reduce poverty and competition in South nations.

Moreover, industrialized countries receive enormous benefits from the use of foreign specialists, saving spending on education. Nevertheless, brain drain can damage the economies of developing countries. For instance, the massive departure of medical personnel from these countries does not stimulate disease control and high child mortality (McLaren, 2017). However, in North markets, the healthcare sector is constantly improving, and significant advances have been made in medicine. For example, life expectancy has increased, and infant mortality has been sharply reduced; accordingly, the need for medical personnel is growing (McLaren, 2017). Concerning the consequences of migrants’ flow and unemployment dynamics, it does not have any noticeable effect on the unemployment rate. The latter is primarily associated with the state of the economic situation. With economic growth, migrants are becoming a necessary resource for economic prosperity.

Technological Change

Outcomes of technological change are characterized by modification of the composition of the labor force. Massive computerization has not led to an increase in the number of unemployed (McLaren, 2017). These changes are not recognized as a cause for unemployment but indicate significant shifts in work structure (McLaren, 2017). Labor productivity growth results in higher wages, but the latter can be irregular. Therefore, particular groups of workers benefit significantly rather than others occupied in different sectors (McLaren, 2017). Labor markets in developed countries are experiencing large-scale structural changes caused by the third technological revolution.

On the one hand, the request was prevailed by managers and specialists; on the other hand, unskilled workers were employed in public services and trade. The role of highly qualified labor is significantly increasing; a direct outcome is the emergence and rapid development of the international market for competent specialists (McLaren, 2017). Primarily it involves the field of information technology, which is accompanied by an increase in intellectual migration (McLaren, 2017). Such flow can be regarded as a general movement of human capital assets through the exchange of knowledge and experience, including brain gain and brain drain (McLaren, 2017). This process has a global character and is inherent in various economies of all countries, including developing ones.

Deindustrialization

Since the late 70s, deindustrialization has begun, starting the process of social and economic changes caused by the decline or complete cessation of industrial activities in specific regions or countries. It concerned especially heavy industry and industrial production. The share of value-added generated by the sector has been rapidly declining in favor of distribution, after-sales, information and financial services to consumers of goods (Pike, 2020). Deindustrialization primarily affected countries with the highest level of economic and technological development. At the same time, developing South states were intensively industrializing, demonstrating sustainable economic growth.

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However, it is partially true as there is another trend; deindustrialization commenced much earlier in South countries compared to economic performance in North ones. One of the reasons may be globalization and the openness of the economy, making it difficult for states like Brazil and India to compete with East Asia’s industrialized countries (Pike, 2020). According to Pike (2020), it might arise due to international financial institutions’ policies, such as the World Bank with the International Monetary Fund (IMF) assistance. Pike (2020) also argues that China’s entrance into world manufacturing, automation innovation, along with alterations in supply chains and logistics channels, also benefit this process. Therefore, several trends have contributed to such activities, including globalization and new market actors.

Moreover, premature deindustrialization might be caused by the relocation of manufacturing jobs to lower-wage economics. For instance, since the 1990s, multinationals have been offshoring substantial manufacturing activities to emergent economies in the global South (Pike, 2020). They reorganized and geographically extended their production networks. For some countries, this is a factor in weakening positions in the world labor market and deteriorating socio-economic, scientific, and technological development opportunities. For others, it might become a determinant of economic growth and sustainable scientific and technical progress.

Automation of Industrial Production

Industrial automation can bring significant social and economic changes. Besides common robotization, new formations of more advanced autonomous systems are emerging, including self-governing vehicles on the road to self-checkout machines in grocery stores (Acemoglu and Restrepo, 2019). In general, this progress has been driven by improvements in systems and components, including machinery, sensors and software. For example, while artificial intelligence (AI) benefits businesses and society, society might face major disruptions (Acemoglu and Restrepo, 2019). AI and automation can threaten social stability and create economic strain.

Automation imposes pressure on average wages in developed markets. In advanced economies, the situation with most current middle-wage occupations, such as manufacturing or accounting, leads to supplant by high-performing activities (Acemoglu and Restrepo, 2019). It can affect one and a half billion people; this data reflects China, India, Japan and the United States. In Europe, such countries as France, Germany, Italy, Spain and the UK will experience the changes (Acemoglu and Restrepo, 2019). Computerization and digitization of work processes eliminate the need for mid-skilled and low-skilled employees, while the demand for highly skilled workers is skyrocketing.

One of the consequences is the possible disappearance of specific jobs. By 2030, some professions will face significant reductions as automation displays workers (Acemoglu and Restrepo, 2019). According to Acemoglu and Restrepo (2019), approximately 15 percent of the world’s workforce could be replaced by mechanization by 2030. However, another consequence is the increase in jobs as technological growth has contributed to remote employment and self-employment (Acemoglu and Restrepo, 2019). The stimulus for self-employment increase was the development of platform solutions, such as Uber, and Airbnb. Therefore, this process might significantly transform the labor market from a positive perspective.

The purpose of higher education is becoming crucial as workers require various skills to advance their career. The demand for master technical competencies, including programming, will progress (Acemoglu and Restrepo, 2019). Emotional, social and critical cognitive skills, including creativity, profound information processing, and critical thinking, will also expand. The mainstream demand for digital skills is growing, and this trend accelerates (Acemoglu and Restrepo, 2019). In terms of globalization, most countries already face the challenge of adequate education and training to meet employers’ current needs.

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Conclusion

One of the principal features of the labor market’s globalization is a qualitative change in the migration flow structure. It is also associated with the technological revolution and an increase in the proportion of migrants with a high level of education. The development and implementation of innovations in various industries have led to the formation of a particular segment of the world labor market – scientific and technical specialists. Concerning the consequences of technological change, deindustrialization, and the increasing automation of industrial production, they are linked with globalization but have different origins. Appropriate measures and policies should be adopted to resolve issues; for instance, it is necessary to use automation and AI to reap increased productivity benefits. Technological changes will create economic surpluses that will help societies transition to workforce change. The policies should emphasize ensuring the transformation of the labor market without providing social tension.

Reference List

Acemoglu, D. and Restrepo, P. (2019) ‘Automation and new tasks: How technology displaces and reinstates labor’, Journal of Economic Perspectives, 33(2), pp. 3-30.

Blinder, A. S. (2009) ‘How many US jobs might be offshorable?’, World Economics, 10(2), pp. 41-78.

McLaren, J. (2017) ‘Globalization and Labor Market Dynamics’, Annual Review of Economics, 9(1), pp. 177–200.

Pike, A. (2020) ‘Coping with deindustrialization in the global North and South, International Journal of Urban Sciences, 4, pp. 1–22.

Steger, M. B. (2017) Globalization: A very short introduction. 4th edn. Oxford: Oxford University Press.

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NerdyRoo. (2022, July 13). Globalization and Labor Market. Retrieved from https://nerdyroo.com/globalization-and-labor-market/

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