Global Labour Market

Amidst the Great Recession, people are finally coming to grips with the fact that the global labour force has virtually doubled in size in the last 15 years. The doubling has resulted from the increased number of persons in the global economy that results fromChina,Indiaand the ex-SovietUnionembracing market capitalism.

Having twice as many workers and nearly the same amount of capital places, creates pressure on labour markets throughout the world. This pressure will affect workers in the developing countries who had traditionally participated in the global economy, as well as workers in advanced countries. Countries that had hoped to grow through exports of low-wage goods must look for new sectors in which to advance if they are to make it in the global economy.

Looking at advanced countries,Mexico,ColumbiaorSouth Africacannot compete withChinain manufacturing, as long as Chinese wages are one-quarter or so of theirs, especially since Chinese’s labour force is roughly as productive as theirs. The entry of 1.47 billion new workers also pressures labour in advanced countries. The traditional trade story has been that most workers in advanced countries benefit from trade with developing countries because advanced-country workers are skilled, while developing-country workers are unskilled. But this analysis has become increasingly obsolete due to the massive investments that the large developing countries are making in human capital.ChinaandIndiaare producing millions of college graduates capable of doing the same work as the college graduates of theUnited States,JapanorEurope, at much lower pay.

In 2010 a shift in the monopoly was recognisable asChinagraduated more PhDs in science and engineering than theUnited States. The huge number of highly educated workers inIndiaandChinathreatens to undo the traditional pattern of trade between advanced and less developed countries. Historically, advanced countries have innovated high-tech products that require high-wage educated workers and extensive R&D, while developing countries specialize in old manufacturing products. The reason for this was that the advanced countries had a near monopoly on scientists and engineers and other highly educated workers.

Job migration is also important when looking at the global market asChina,Indiaand other developing countries have increased their number of university graduates, this monopoly on high-tech innovative capacity has diminished. Today, most major multinationals have R&D centres inChinaorIndia, so that the locus of technological advance may shift.

Unemployment and the loss of jobs in developed countries are quite commonly associated with globalisation. Some of the current trends in globalisation and unemployment are multinationals have exported jobs from developed countries to developing countries through foreign investments and outward production in special economic zones, through trade liberalisation, governments have encouraged the replacement of domestically produced goods with goods produced abroad, the increased application of technology, especially in globally operating companies, can reduce the use of and dependence on labour and women are entering the global labour force in record numbers, but they still face higher unemployment rates and lower wages and represent 60 per cent of the world’s 550 million working poor.


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