Section 9: The Labor Market

9. The Labor Market > Does a Global Market Exist? > Lecture

• The concept of a global labor market is one of the fundamental and most discussed aspects of globalization.
• There is worldwide concern about the present and future unemployment of large numbers of workers because of the social unrest and political instability that can result from labor markets that are unable to absorb those who want and need jobs.
• There is a widespread sense that global employment in an economic sector such as manufacturing is a zero-sum game, that more jobs in one country must mean fewer jobs in another and that unemployment in the factory or economic sector that has lost those jobs will persist for an indefinite period of time.
• The countervailing and more optimistic claim is that the loss of relatively low-skilled jobs to outsourcing will be more than made up for when the displaced workers are trained to fill more highly-skilled and better paying jobs.
• There are economists today who no longer believe that the retraining of workers will be able to keep up with the rate at which automation will create unemployment on a global scale.
• We have become accustomed to the idea that the many millions of Chinese workers, whose labor has created the greatest export boom in history, will always be employed.
• In a genuinely integrated world economy, workers would migrate freely to new places of employment and settle there.
• More than 10 million Mexicans have sought and found work in the United States.
• Over the past 50 years, millions of so-called guest workers have found work in Western Europe.
• As of 1996, there were almost 10 million foreign workers in Middle Eastern countries, including 60% of the workforce in Saudi Arabia.
• About 300,000 Philippine citizens have migrated to ships around the world to work as seafarers.
• These foreign workers send home cash remittances on an economically significant scale.
• On a global scale only a very small percentage of workers leave their home countries to work overseas.
• Even the liberal work rules of the European Union have not motivated more than a few percent of Europeans to work in other countries.
• The large wage differentials that persist between developing and developed societies are more evidence that the global labor market is not fully integrated, since workers in different parts of the world are not being paid the same wages for the same work.
• At the same time the decision to outsource is motivated by the substantial difference in wages paid to workers doing the same jobs in two different geographical locations.
• Companies in the United States can often save money by outsourcing work to companies in India.
• Intercontinental wage differentials indicate less integration, while geographically separated workers doing the same jobs indicate more integration.
• In these labor markets, top athletes, entertainers, and academics are granted both maximum mobility and substantial financial rewards.
• One might say that these global celebrities belong to a working elite that symbolizes, for its global audience, an integrated and meritocratic workforce that is unlikely to appear anywhere else in the global labor market.
• These workers may face discrimination and lack of access to important services like bank accounts.
• The original guest workers, who were recruited to work in German factories during the 1960s, came from Mediterranean countries, Italy, Spain Greece, Turkey, Morocco, Portugal, Tunisia, and Yugoslavia.
• While German officials believed that these workers would eventually return to their countries of origin, it turned out that they were mistaken.
• People from many African countries, desperately seeking entry into the European labor market, over land and in small boats, now constitute nothing less than a humanitarian crisis, as hundreds of people have drowned trying to reach the Mediterranean coastlines of Spain, Italy, and Greece.
• In summary, obstacles to immigration and workplace discrimination in developed countries are another factor that prevents a fuller integration of the global labor market.
• Global labor migration also provides crucial funds for the undeveloped countries migratory workers leave behind as they seek employment abroad. Foreign workers take these so-called remittances out of their salaries and send this money back to their countries of origin.
• According to the World Bank, foreign workers sent $401 billion to their families in developing countries in 2012.
• On a macro scale, we know that the global labor market has been unified over the past several decades by China’s decision to go down the capitalist road and by the collapse of the Soviet empire.
• The entry of huge numbers of low-skilled workers into the global labor market has kept the wages of their counterparts in the developed world from rising as much as they otherwise would have done.
• The McKinsey Global Institute predicts that China and the advanced economies are going to lack tens of millions of educated workers they will need.