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Pros and Cons of Economic Globalization

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Globalization and employment in the industrial sector of less developed countries

Outline

  • Introduction
  • Economic Globalization: Pros and Cons
  • Statistical Factors and Employment Globalization Analysis
  • Conclusion and Recommendations

Executive Summary

The paper focuses on the problems of globalisation and joblessness. In the manufacturing sector of less developed countries (LDCs), there are various ways of globalisation affecting job trends. The paper deals with the effect on job trends of economic globalisation. There is debate on both governmental and commercial issues. Particular attention is paid to the impact of globalisation in the manufacturing sector of the LDCs, as an example of applicable studies and research.

Introduction

The new trend of globalization is a wide-ranging topic for debate in a variety of research and studies. It cannot be denied that various dynamic aspects are correlated with this background.The borders between various nations are blurred, and it is necessary to concentrate on clear requirements for the creation of different patterns of jobs that vary from those that existed previously. Globalization has several different facets, and we will focus further on economic globalisation. Concerning it, we found it necessary to define the phenomenon of financial globalization: “Economic globalization refers to the increasing interdependence of world economies as a result of the growing the size of cross-border trade in goods and services, the influx of foreign capital and the widespread and rapid spread of technology. It represents the continued growth and mutual integration of the business boundaries. It is an irreversible trend for the economic development in the whole world at the turn of the millennium[1] ” It can be surely claimed that the development of technologies and flow of international capital across different countries enable foreign markets to create a significant number of new jobs. Employment is moving at a full speed, yet this phase evokes many different social reactions quite often. Globalization has steadily increased in the economic world, on the one side, and numerous reforms have occurred to promote globalisation processes.

Pros and Cons of Economic Globalization

Economic Globalization: Pros and Cons in the Manufacturing Industry of LDCs

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Let us concentrate on economic globalisation and its effects on the LDCs (less developed countries). In this scenario, we can see the following picture: the tariff barriers to foreign trade have become much smaller, and the rapid market growth in the world is in due course. World trade, commodities and products are on the road of constant development and growth in global trade. As a result, the expense of transport and connectivity around the world is widening the rules of international regulations. As a result, the terms and conditions of employment of employees in various fields should be correlated with investment options and a free financial flaw. Lee (1996 ) found that “there is a big current of apprehension about the impact of globalisation on jobs and income inequality”. On the face of it, this is hard to reconcile with the voluntary shift in democratic societies into a much more open world economy, which are also the only countries where apprehension is expressed[2]. In addition, LDCs have several opportunities to pursue the government’s and global society’s line of credit processes to increase their efficiency. Globally, less developed companies are encouraged and supported.
Nowadays, there are many winners in jobs, but there are also many losers. Globalization often results in job losses, but it can create some exciting and prospective jobs at the same time. There are various global trade trends and the generation of jobs is on the potential edge of getting many growth opportunities. Changes in job trends have often been exacerbated by economic globalisation. This usually results in the integration of financial capital markets.

There are numerous factors in globalization, which exert influence on the employment patterns. Firstly, it can be said about the number of jobs available in the economy. The central macro-economic variables (unemployment rate and the employment-to-population ratio) are properly considered on the background of the globalization. For example, the occurrence of offshoring can be positioned both as a favourable and unfavourable employment factor. This can be explained in the following way: if the company moves from one country to another, people in the source country can lose their jobs, while people in a target country can get new posts [3]. If this pattern is ineffective in LDCs, then business people have a chance to introduce their economic incentives and open new firms locally.

Another factor, which is determined as globalization factor influencing employment patterns, is the structure of jobs. It means that economic activities can produce new posts or remove tasks of previous years. For example, technological progress can be considered as a critical, influential factor, which provides some innovative jobs in the field of technology and industry. Therefore, other areas may suffer losses of jobs. Following the study by Brooks, Weatherston, Wilkinson (2004) Globalization, challenges and changes: “We can see it in the relocation of manufacturing from more developed economies to those that are less developed, or in the transfer of call centres from the UK to India or from the USA to Puerto Rico. Offshoring will inevitably involve the loss of employment in the country of business”[4].

Nevertheless, the sector of manufacturing in LDCs suffers a lot from lacking investments and relying mainly on the external support of other governments. The composition of jobs is a very complicated task too. Thus, it can be claimed that there are both unskilled and skilled workers. Thus, globalization influences these categories differently. Workers from developed countries would be affected by stagnating revenues and a high level of competitiveness from workers from developing countries. Moreover, workers from developing countries can obtain more top quality of education and excellent professional skills.

Migration of employees is another relevant issue because it is the main reason for people to migrate. Currently, there are many regional agreements, which liberalize the movement of people. Thus, the patterns of specialization are changed, and multinational companies are on the way of their rapid development. In the result of the migration, there is an essential increase of money inflow. It is on behalf of the employers to provide the employees of their companies with friendly job conditions. As Brooks, Weatherston, Wilkinson (2004) claim: “Changes in employment and career patterns have important and far-reaching consequences for pension provision and some welfare payments. With an ageing population, the government fears the rising burden of pension and welfare demands upon the public purse”[5]. In the manufacturing industry, small-scale and large-scale enterprises go hand in hand and very often, they produce competitive products almost simultaneously. Therefore, it is appropriate to consider changes triggered by the globalization in dynamics. With a course of years, the changes in employment patterns can be changed, and they should be correlated with the population’s age, changes in their education, living conditions and other social and economic factors.

Another essential factor to be considered is the employment conditions. This issue is focused on critical components. Thus, in the case of economic competition, labour costs can be changed too. It was found out that safety requirements are not adequately considered; trade unions do not exist anymore; multinational enterprises are on the way of development. A decisive role of the offshoring cannot be denied too. Under conditions of globalization, this field is essential for new jobs creation[6]. Of course, the manufacturing industry is lacking appropriate working conditions for their employees.

Concerning analytical tools used for discussion about the influence of globalization on the employment conditions. Thus, such devices as statistical factors; trade or job content method; econometric models are applied in the process of further discussion.

Statistical Factors and Employment Globalization Analysis

It can be said that the abovementioned factors are useful for a detailed analysis of the labour market. The impact of globalization on employment in a particular country occurs in the result of the conditions of economic globalization. A number of the following factors, which consider technological, demographic or social factors, are also decisive in the discussion of the globalization issues.

Pros and Cons of Economic Globalization

Pros and Cons of Economic Globalization

[7]On the example of the tables, it is evident that different categories of people or countries can find different pros and cons of globalization processes. LDCs can be dependent on labour quality of the employees from developing countries, but they can lose jobs for their population.

The number of jobs in the manufacturing industry in LDCs is the most decisive factor than the global number of posts. The econometric model assesses the influence of economic globalization on employment. There is another type of influential factors, such as regression analyses (logistic, linear, etc.). These techniques are applied to evaluate the outcomes of employment and globalization. There is a lack of proper alternatives, and the econometric models can be useful tools for employment/globalization relation measurement.

Free markets come across numerous challenges under conditions of globalization. Free market fundamentalism is another strong background for the development of strong relations between the leading companies and workers from different countries and industries.

Following the study of the late 90s, it is evident that there is a precise ratio among employment, globalization and welfare[8]. The explanation is the following one: a demand for protection is often correlated with the development of free trade. The introduction of big social programs is often directed on improvement of education or any other social issues. Free trade has rarely been positioned as a favourable and a friendly source for compensation. It is often argued that: “Many countries have a legally enforceable minimum wage, but the consequences may be higher levels of unemployment among low-skilled, particularly young people. In many countries, governments are considering age discrimination legislation, in particular, to prevent discrimination in the employment of older people”[9]. There are evident positive effects for the manufacturing industry in LDCs in terms of these programs.

Cheaper goods and services contribute much to welfare growth—opponents of globalization claim that the process of relations development between globalization and employment is inevitable. There are increased gains from growing competition in the global market and a particular industry. It is possible to illustrate this trend by the following example: “Greater efficiency allows for continued economic expansion and the creation of new jobs and other economic opportunities. Competition offers advantages to customers in the form of lower prices”[10]. Moreover, in developing countries, there is an evident inflow of FDI. It is the right way to the creation of workplaces. Globalization proponents underline that the government interventions are required for vital processes improvement. Thus, it is evident that the proponents of globalization are focused on a favourable impact of globalization on employment.

From the perspective of opponents of globalization, there is even a decline in the outcomes of some families. Thus, American families have witnessed a real decrease in their incomes since the 70s. It was found out that there are evident trends of inequalities and transnational corporations are gaining money hand over fist, but small businesses are developing under hazardous conditions. There are many rules and regulations, which are often neglected by small firms and companies, and attention is paid to the demands of mobile companies. Large multinational companies often overlook the issues of the environment. Currently, there was an interesting claim about relations of globalization and employment: “As a consequence, many organizations have sought to achieve greater flexibility in employment conditions in recent decades. Employers and employees are leading the trend, with governments often regulating, sometimes encouraging, and legislation-based developments. That said, ‘flexibility’ sometimes means different things to people rather than businesses”[11].

Following a popular Heckscher-Ohlin (H-O) model, which is focused on the issues of labour and capital, in case of trade rise, there is an evident rise in labour demand. Thus, developing countries concerning this model gain much from trade expansion. The issues of unemployment and manufacture are considered in terms of this model, but the result can be different from what is expected. This method is justified and is deemed to be “a purely comparative static prediction – the time is irrelevant since the adjustment is instantaneous – and it depends solely on the transition of resources between activities using technology, not the use of specific or new technologies”[12]. Further discussion occurs on the example of this model because LDCs are mainly focused on export.

The impact of liberalization and globalization of trade is very much crucial for developing countries. Very often developing countries are accused of a low growth equilibrium and deal with low-technology and slow-growing activities. In terms of the neoclassical theory, it is evident that employment is increasing based on physical factor endowments. In terms of technology gap theories, developing countries can export low technology or traditional products. Thus, employment increase can be dependent on relative innovative or technological progress.

Therefore, concerning globalization and its impact on employment in LDCs, it can be surely claimed that: “globalization can offer many employment benefits to developing countries. In the external world, these countries face more open markets, lower transport costs, easier access to information, easier access to technology and easier capital to raise: the promise more exports, faster technology transfer and increased investment resources”[13]. These are favourable and friendly conditions for the expansion of employment. At the local level, if the world economy is integrated tightly with the world’s market, then labour-intensity occurs. Work can increase in case of technology inflows, FDIs, capital and skills expansion, services growth etc. As far as we can see, there are many different reasons, which determine positive changes in employment patterns in the process of globalization.

Conclusion and Recommendations

Globalization can contribute much to the development of employment. Particular attention should be paid to developing countries. Rational activities of developed countries across international boundaries can create an effective system of resources exploitation at a higher level. Wealth technologies and competitive enterprises can sustain output, export and employment in different countries. The local budget of the country can benefit much in case the following conditions are performed: a wealth of new, highly productive technologies; rapid and sustained output, export and employment growth etc.

The only possible way for resources advancement and promotion of the given technologies is globalization development and improvement. Following Brooks, Weatherston, Wilkinson (2004): “Given this immense productive, absorptive, allocative and resource transfer potential of globalization, it may seem that simply opening economies up to global market forces is good –perhaps the only – way to promote employment and growth today”[14]. Markets are always active, especially in global markets. They provide many benefits for poor people and create numerous opportunities, both locally and globally.

LDCs become open for free trade. Employment can be reduced, and local enterprises can be motivated for cooperation and performance both locally and globally. The growth of jobs can lead to competitive advantages at different levels. There is a lack of national capabilities, and the globalization, in this case, exerts a negative influence on the welfare of some countries.

In the developing world, the level of FDI concentration is growing. Concerning global and dynamic development of the international trade and market, it can be claimed that global production systems are very much concentrated. Following the recent studies and researches: “The success stories in the developing world may thus be the exception rather than the rule; their experience may well reflect other factors – policy strategy, position or even good luck – rather than the beneficial impact of global market forces on their own”[15]. The process of globalization leads to sustained growth, and there is a need to take necessary measures to continue divergence between the economies of different countries. Therefore, it is possible to summarize the following points about the correlation between globalization and employment.

The global environment is a sophisticated background for changing development of organizations, individuals, groups and governments. A significant number of external factors exert an evident influence on economic, political, technological and social factors. In the case of globalization, non-linear patterns of organizations’ functioning can be present. Therefore, changes in employment patterns can be found in the occurrence of such types of works as teleworking, part-time work, temporary work etc. With a changing culture, people’s experiences are changing too. As a rule, the governments of different countries pay attention to the changing environment and make many attempts to adopt those changes. Global solutions in various fields of human activities introduce a certain degree of changes. Moreover, patterns of employment depend on the organizations’ ability to flexibility and responsibility.

References
  • Brooks, Weatherston, Wilkinson. Globalization, challenges and changes (2004). http://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/Brooksch9.pdf
  • Elijah, Obayelu Abiodun. “Effects of Economic Globalisation on employment trend and wages in developing countries: Lessons from Nigeria experiences”. Selected paper for presentation at the twenty-second National Conference of Labour Economics organized by the Association of Italian Economist of Labour (AIEL), September 13-14, 2007.  http://ageconsearch.umn.edu/bitstream/7433/1/elijah.pdf
  • Lee, Eddy. “Globalization and Employment: Is Anxiety Justified?” International Labour Review, 135, no. 5 (1996): 485+. http://www.questia.com/read/1P3-11173991.
  • Lipsey, Robert E., and Jean-Louis Mucchielli, eds. Multinational Firms and Impacts on Employment, Trade, and Technology: New Perspectives for a New Century. London: Routledge, 2002. http://www.questia.com/read/108296636.
  • Smith, Christine L. “Employment Expansion and Macroeconomic Stability under Increasing Globalization.” International Labour Review 136, no. 2 (1997): 277. http://www.questia.com/read/1P3-16420776.
  • Smith, Ian G., and Yaw A. Debrah, eds. Globalization, Employment, and the Workplace: Diverse Impacts. London: Routledge, 2002. http://www.questia.com/read/108220011.
  • Shangquan, Gao. Economic Globalization: Trends, Risks and Risk Prevention (2000).
  • http://www.un.org/en/development/desa/policy/cdp/cdp_background_papers/bp2000_1.pdf
  • Verme, Paolo. “Understanding Globalization, Employment and Poverty Reduction.”International Labour Review, 144, no. 3 (2005): 348+. http://www.questia.com/read/1P3-982979811.
  • [1] Shangquan, Economic Globalization: Trends, Risks and Risk Prevention, 2000
  • [1] Gao Shangquan, “Economic Globalization: Trends, Risks and Risk Prevention” (2000)
  • [2] Eddy, Lee, “Globalization and Employment: Is Anxiety Justified?” International Labour Review, 135, no. 5 (1996): 487.
  • [3] Lipsey, Robert E., and Jean-Louis Mucchielli, eds., Multinational Firms and Impacts on Employment, Trade, and Technology: New Perspectives for a New Century. (London: Routledge, 2002).
  • [4] Brooks, Weatherston, Wilkinson Globalization, challenges and changes (2004)
  • [5] Brooks, Weatherston, Wilkinson Globalization, challenges and variations (2004)
  • [6] Ibid.
  • [7] Shangquan, Economic Globalization: Trends, Risks and Risk Prevention, 2000
  • [8] Christine, Smith, “Employment Expansion and Macroeconomic Stability under Increasing Globalization,” International Labour Review 136, no. 2 (1997): 277.
  • [9] Ibid.
  • [10] Smith, Ian G., and Yaw A. Debrah, eds. Globalization, Employment, and the Workplace: Diverse Impacts (London: Routledge, 2002).
  • [11] Brooks, Weatherston, Wilkinson Globalization, challenges and changes (2004)
  • [12] Ibid.
  • [13] Elijah, Obayelu Abiodun, “Effects of Economic Globalisation on employment trend and wages in developing countries: Lessons from Nigeria experiences”, Selected paper for presentation at the twenty-second National Conference of Labour Economics organized by Association of Italian Economist of Labour (AIEL), September 13-14 (2007).
  • [14] Brooks, Weatherston, Wilkinson Globalization, challenges and changes (2004)
  • [15] Ibid.

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