Trade and Labour Markets

What does increasing globalization mean for workers? This would appear to be a fairly straightforward question to which one might have a forthright answer. In fact, ‘the answer’ may just depend on one’s perspective. To the auto worker in Detroit, increasing integration of the world economy means long-term unemployment, loss of human capital, and perhaps lost dreams. For the new university graduate in India, rapid globalization may mean the creation of exciting new opportunities for employment in well-paid jobs. Deeper integration with the world economy provides a campaign issue politicians of all stripes: some railing against the damage caused by a tsunami of cheap foreign imports with others extolling the vast benefits of greater access to foreign markets. For a trade economist, expanded trade might mean changes in relative price and the associated Stolper-Samuelson effects, reducing real wages in labour scarce countries while increasing real wages in labour abundant countries. In contrast a labour economist might suggest that the factor trade implicit in a country’s net exports effectively augments (or diminishes) the country’s available supply of labour, thereby reducing (or increasing) the wage.