Globalization is associated with an increased probability of job loss

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"Globalization is associated with an increased probability of job loss"

1) The impact of free trade and more generally globalization is a ready source of public debate, and the reach of that debate is broadening. 1. When the impact of increasing foreign competition was felt mainly by manufacturing sector . 2. Services outsourcing - the debate over globalization and the labour market.

Trade generates large net benefits to national economies . The gains accrue to consumers from lowerprices and to the overall economy in efficiency, leading to higher aggregate welfare. Within the economics professions, there is similar, if less visible, agreement that liberalized trade reduces incomes to some producers and workers.With large net benefits, a common professional view of the question of “free trade” is a distributional one - that the distribution of the benefits from free trade , across industries, occupations, regions, and ultimately individuals, is uneven. globalization economic political

There is a shared sense that globalization is a powerful engine that has already contributed to lifting many out of poverty and that, if properly harnessed, could further promote growth and development to the benefit of all. For many years, however, concerns have been raised regarding certain effects of globalization on jobs, wages, and job insecurity. Recent survey evidence in European countries, for instance, indicates that in most countries a majority of respondents believe that globalization provides opportunities for economic growth but increases social inequalities.A German Marshall Fund (2007) survey shows that about half of Americans and Europeans think that “freer trade” results in more job loss than job creation. Globalization has also been blamed for the recent financial crisis and its effects on employment.

Global outsourcing of services, so called offshoring is the services version of the globalized production that has become commonplace in manufacturing. With services outsourcing broadening job loss to higher skill workers and with its implicit challenge to presumed American comparative advantage, these advantages, these activities appears to raise some new concerns, different from the ones voiced in the past. Whether different or the same, the arrival of services of outsourcing virtually guarantees that international trade and globalization will remain an important focus of public attention to job loss.

2) Holger Gцrg discusses the phenomena of trade and offshoring separately. Regarding the trade-employment linkage, he finds that over the last decade the view that there should be no substantial link between employment and trade has slowly changed due to new theoretical developments and new empirical results. These results generally suggest that imports may cause job displacement in the short run, due to adjustment costs. While far fewer studies have been able to consider differences between the long and short run, those that have done so generally find that, in the long run, there appears to be a positive relationship between imports and employment. However, this may not be true for all firms that engage in importing, as suggested by a number of recent studies. As regards the impact of offshoring on employment, Gцrg emphasizes that it results from the combination of a number of different effects. Offshoring frequently leads to productivity increases and expanded sales in the company that offshores. The result may be that this same company ends up employing more rather than fewer people. This is the so-called “scale effect” of offshoring. The jobs created may be of a different type, though, than those offshored. In addition, as a consequence of offshoring a company may provide its services to other businesses at lower cost, and the latter may be able to expand activity and employment (depending upon their employment-sales ratio). Finally, if offshoring results in lower prices to final consumers, their real income increases and some proportion of that real income will be spent on domestically produced goods and services, again raising overall employment in the offshoring country.

Gцrg's review of the literature suggests that just like trade, offshoring is likely to trigger a reshuffling of employment with some workers temporarily losing their jobs and possibly taking time to find a new one. This reshuffling can in theory lead to temporary surges in an economy's level of unemployment, but there is not much evidence that this indeed happens in practice. For the individuals losing their job,though, this is not much of a consolation as the transition may cause significant hardship for them and their family. Also, the employment effects are likely to differ across type of workers. The evidence points in the direction that low-skilled workers are more likely to lose and high-skilled workers more likely to benefit. Very recent work also emphasizes that the effect of offshoring may differ across occupations, with workers in “tradable occupations” being more likely to lose than those in “non-tradable occupations”.

Overall, Gцrg draws four main conclusions from the still relatively scarce literature on globalization and employment. First, globalization and, in particular, offshoring may lead to higher job turnover in the short run. Second, in the long run there is no indication that trade or offshoring leads to higher unemployment (or lower employment) overall, although employment of low-skilled workers may suffer while high-skilled employment may expand. Third, even where effects are statistically significant, the economic magnitude thereof is still debated, with many studies concluding that they are economically negligible. Fourth, there is evidence that the structural change away from manufacturing towards services sectors in advanced economies goes hand in hand with the process of globalization.

3) Globalization is the main impact power of global crisis. And it is vital to emphasize The Great Recession that also influenced to increasing of level of job loss. Moreover, the great recession was notable for the diversity of its impacts on labour markets in different parts of the globe. While there may have been a Great Synchronization in the timing of the trade cycle, labour market responses were notable for their diversity in both timing and scale. The ILO (2011) estimates that the world unemployment in 2010 stood at 205 million, equivalent to a global unemployment rate of 6.2 per cent and 27.6 million higher than in 2007. OECD (2011) estimates suggest that between

2008Q1 and 2010Q3 unemployment in the European Union rose by 5.6 million and in the United States by 6.6 million. During this recession, the performance of the labour market in the developed world has been weaker than in developing countries. Although there has been some recovery in output in the developed world, any associated increase in employment has been limited. Thus far, the recovery has been “jobless”. The numbers largely relate to changes between 2008Q1 (which we take as the starting point of the recession) and 2010Q3.

Most OECD countries outside Europe, with the exception of the United States, experienced some employment growth since 2008. In Europe, the picture is less optimistic. For example, in Ireland and Spain, countries both affected by a construction “bubble”, employment fell by 13.3 per cent and 9.1 per cent respectively. In the United States, a very large drop in employment was matched by an almost identical increase in unemployment. But in the United Kingdom, unemployment rose by more than twice the fall in employment, whereas in Japan the increase in unemployment was only around half of the decline in employment. Changes in employment were not necessarily good predictors of changes in unemployment. Employers in different countries have responded in a variety of ways to a fall in product demand.

This has depended on the nature of employment contracts, human capital investment, the existing policy environment and any changes introduced specifically to combat the recession. Employees' responses have also depended on the nature of their contracts, joint investment in human capital and on their valuation of the next best alternative to employment.

The main focus has been on the mitigating role of labour market institutions on this general outcome. We found that for those countries providing more labour market support in the form of greater spending on active labour market policies and higher short-term unemployment replacement benefits, offshoring had larger positive effect. Our regression analysis by country shows that offshoring is associated with a reduced labour share in sectoral value added and, thus, with a higher share of corporate profit in Japan, Portugal, Spain and the United States - all countries with a low and medium labour support.

The regression results by country groupings show that the effect of offshoring is negative in the Anglo-Saxon (without Australia) and Mediterranean countries, while it is positive in the Rhineland and flexicurity countries. In the final section of the chapter we turned to the relation between perceptions of globalization based on surveys and the actual effect as estimated by our labour share regressions. We found a weakly negative relation between growing enthusiasm for globalization and the effect of offshoring on the labour share. This weak negative correlation supports the notion that perceptions and reality are linked.

4) As in all cases of failure and downs of the economy, there are measures of social security due to global unemployment. Several kinds of measures to avoid the global financial crisis and unemployment. Social protection refers to publicly provided safety nets of two kinds. The first type is poverty alleviation measures which help people who are born poor or who lack the productive assets or skills to get out of poverty. The second type consists of social insurance programs or other labour market interventions that allow people to deal with labour market risk. The focus of this part of project is the social protection systems of the latter type which protect individuals against the negative consequences of labour market changes caused by external shocks. In section 6.2 we discuss in detail the reasons for the need for such social protection when workers are vulnerable to shocks, especially in a more globalized world. There is a case for social protection when workers are exposed and vulnerable to shocks. Globalization, the major components of which are trade reforms and openness to capital flows, is in large part driven by policy. There are , therefore, some control programs like Unemployment insurance, public work programs that governments have over the kinds of shocks caused by globalization.

Public works programs policy responses and find that in many countries public sector intervention has indeed had a significant attenuating effect on the economic and employment impacts of the crisis. The first policy response to the financial crisis has been to adjust monetary policy and to stimulate monetary expansion through means like interest rate cuts. A second response to the crisis has taken the form of the operation of automatic stabilizers. As private demand fell, government spending on a variety of social insurance schemes increased. In the immediate aftermath of the crash this took the form of increased spending on unemployment benefits, above all. The third response was the introduction of discretionary measures to boost aggregate demand, although it has been found that these made a smaller contribution to maintaining output and employment than automatic stabilizers.

Last but not least, some countries have made use of new or more generous active labour market policies (ALMPs) during the crisis. Schemes to support short-time working (STW) and so avoid lay-offs have been introduced or reinstated in a number of countries. Also, measures to reduce non-wage labour costs and so encourage employers to substitute labour for capital have been introduced. However, the additional discretionary spending on these ALMPs in response to the recession has been small. It has been shown that these schemes helped preserve Permanent jobs during the downturn but that they did not help maintain temporary employment.

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