International Trends towards Globalisation - Coursework Example

International trends towards globalisation Abstract This paper discusses international trends towards globalisation and deregulation of labour markets and their impact on developed and developing countries. Further it explains what are the advantageous of globalisation and deregulation of labour markets for employment relations in both developed and developing countries. International trends towards globalisation Globalisation has made world economies interdependent. International trade of goods and services has increased and there is a free flow of capital across borders. Globalisation results in fast global spread of technology. With market economic system, there is growing importance of information flow in all activities like production, trade and services. Globalisation has developed division of labour in different enterprises and organisations of all countries to the level of their production chains. Globalisation was possible due to the use of advanced science and technology mostly because of reduced cost of transportation and communication. (Anne O. Krueger, 2006) Globalisation has made the world like a global village. The concept of national boundaries and distance for has become meaningless for economic activities and information exchange. The planned and centralized economic systems of the last century have now shifted to market economic systems. The market economic systems in all the countries in the world have now integrated with each other. Multinational Companies have become carriers and catalysts of economic globalisation (WILLIAM I. ROBINSON AND JERRY HARRIS, 2000). The MNCs are undergoing worldwide expansion by allocating resources and organising production globally to maximize profits. Globalisation has also led to substantial increase in income levels on account of the advancement in the fields of science and technology. Global changes in the industrial sector such as restructuring, readjustment and upgrading is taking place worldwide. Statistics shows that there were 44,000 MNCs in the world in 1996, having 280,000 subsidiaries and branches overseas. In 1997, one third of the world’s total trade volume came only from the top 100 MNCs. The MNCs had a major share (over 80%) of the balance of foreign direct investment. There were about 70% of international technology transfers undertaken by the MNCs. (Gao Shangquan, 2000). Developed countries have gradually started entering the era of knowledge economy recently. They have started shifting many labour-intensive industries that do not have strong international competitiveness to the developing countries. This has increased competition among enterprises from different countries in the international market. (Actrav.itcilo.org) In order to stay in competition in the international market, all domestic as well as international companies have resorted to mergers and acquisitions. (Glyn, A. and Sutcliff, B. 1992) This has resulted in tremendous restructuring of the industrial sector and trade. Statistics show that developed countries’ total volume of exports in 1996 accounted for 82% of the total international trade and the foreign direct investments by developed countries that are among the major ones accounted for 85% of entire value of FDIs in the world. (Gao Shangquan, 2000). Impact of globalisation in developed and developing countries Globalisation has had a positive impact in both developed and developing countries. The world has experienced increase in the integration of global economic activities, competitiveness in the international markets is on the rise, economic activities have increased and relocated, and there were structural changes in the world economies. There have been rapid advancements and innovations in science and technology, communication, networking, and information exchange. The countries are shifting to knowledge-based society and networking and increasing social capital. Labour markets have experienced reasonable flexibility and there is an increase in labour migration from one country to other (Esping-Andersen, Gøsta and Regini, Marino (eds), 2009). There is enormous rise in typical and non-standard employment types and changes in working conditions and work content. There is an increase in acquiring more job-skills and multitasking has increased. Last but not the least, the need for lifelong learning has come into play strongly. (Eddy Lee, Marco Vivarelli, 2006) The developed countries play a dominant role in the globalisation process. They promote globalisation, determine the rules for international economic exchanges as well as enjoy the benefits. Developed countries have signed agreements with developing countries to become WTO members to speed up reforms of their economic system, which is situation that can be termed as win-win for both developed as well as developing economies. On one hand, developed countries like US and UK have increased exports of goods and services to developing countries. This has created more employment opportunities. (Philips and Raul Eamets, 2009) On the other hand, developing countries like India and China are giving a boost to their economic growth by increasing trade and commerce activities in the markets of developed nations. Developed countries are extending help to developing countries in terms of supplying capital and loans, transferring more advanced technologies, and sharing rich management experience. Whereas, there is pressure on the developing economies from competition in the international markets, which is a driving force for further reforms and opening up of their markets towards the outside world. This has promoted and increased competitiveness of the companies in developing countries (Easterly, W. 2001). Globalisation has increased the flow of information exchange and cultural interaction. This has helped the developing countries to overcome the cultural barriers. Advanced research and development in technology have resulted in reverse brain drain. Some of engineers, technicians and doctors and scientists who had migrated to developed nations have started looking to return to their own motherlands. There has been a moderate increase in economical and social growth in the developing nations like India and China and outsourcing of jobs to these countries has proved to be profitable to the enterprises in developed countries. This has promoted privatisation in the industrial sector, which has resulted in improved efficiency of the workforce. Globalisation has reduced the inequalities between the rich and poor countries. Several multi-national companies have entered the developing countries and undergone expansion, thereby encouraging contractual work system and thus decreasing the importance of unions. (Bamber, G., Lansbury, R. and Wailes, N. (eds) 2004) Globalisation has eliminated monopolistic behaviour and strengthened the market system and competition. However, the process of globalisation is accompanied by huge amounts of risks for the developing countries. Developing countries have seen an increase of average trade deficit with time. There has been continuous improvement in financial instruments and there has been quick expansion of financial assets. There was a large amount of international floating capital due to the privatization of international capital, which affected the economic safety and financial stability tremendously of these countries. Advantages of globalisation for employment relations in developed and developing countries In general, advantages of Globalisation can be classified into five categories: Internationalisation of markets Increasing competitiveness Increased information exchange through networks Growing importance of market system Market forces have played a relatively strong role in developed countries. The working conditions of the employees have remarkably improved due to a high degree of diversity in cultures. Recently, there has been a noticeable increase in the diversity in labour markets. Developed countries engaged vigorous revitalization efforts as the union representation declined. Diversity also played an important role in collective bargaining outcomes. Globalisation reduced strikes in the industry considerably and some unions were forced into compromises and individual employees were found to benefit from contractual gains significantly. Industries started employing new employees at lower costs. Organizations started getting workforce with diverse skills and qualifications. Globalisation supports rapid advancement of technology for developing countries. It creates growth in employment, rational, codified and simplified pro-labor laws and policies. Globalisation increase flexibility of labor market which increases number of jobs. Deregulation of labour markets In deregulating of labour markets, the government reduces or eliminates certain labour laws, rules and regulations to create and promote efficiency in the labour market and fulfill the market needs. Deregulation of labour markets usually brings greater competition in the domestic as well international market for human resources. Deregulation also creates a conducive environment for the new companies to enter the industry. Deregulation of labour markets has many benefits. (Global Labour University.org) There was a significant increase in income levels of the workers, overall reduction in unemployment. Employees could negotiate their pay packages themselves. Deregulation also improves the efficiency of the industries and provides workers with more fulfilling and better-paid jobs. Deregulation of labour markets had certain disadvantages like decrease in labour wages, reduction in collective bargaining, degradation of working conditions and work practices, increased working hours, increase in external and internal mobility, and increased the need for education and training for unskilled labour. Impact of deregulation of labour markets in developed and developing countries The basic impact of labour market deregulation in developed countries has been decrease in the importance of unions and centralized bargaining. The informal decentralized bargaining and workforce agreements that already existed in some could now be formally registered with the tribunals. Labour market deregulation showed faster growth in high skill jobs than low skill jobs in the service sector. The opportunities for low skilled workers decreased in the labour market ultimately reducing the price of unskilled labour. (Reddy, S. 2004), Governments have reduced support to workers for apprenticeship training and access. The labour market saw an increase in pressure for low skilled workers to work long hours and do multiple jobs to meet ends. Deregulation gave rise to underemployment and unemployment for unskilled workers. This increased the barriers for them to enter the labour market leading to poor financial conditions. Advantages of deregulation of labour markets for employment relations in developing and developed countries Organizations started skill related career paths for employees and providing incentives to them. This helped the employees in multi-tasking and broadening the range of their services. Deregulation of labour markets enhanced flexibility and the efficiency between different categories of workers in an organization. They benefitted from properly fixed minimum wages, medical benefits, insurance, financial aides, transport etc. The relations of the employees with the employers started improving; the employees got motivated and started working efficiently. They contributed satisfactorily to productivity. The organizations also ensured to take care of employees’ health and this is what boosted their morale. Organizations started employing performance management and open communication to manage employee relations successfully. (Wiki Answers, 2009) Conclusion Developing countries in Asia and Pacific have not adopted a uniform approach to employment relations. As the economy develops and moves towards globalisation, it facilitates labour markets and gives support to minimum wage acts, health and safety regulations and dispute-settling mechanisms. It is seen that industrial relations institutions are generally weak and emerging democratization results in legislative provisions to strengthen the rights of enterprise level labour. Governments in many rapidly industrializing economies of Asia are trying to accommodate demands by employees and their unions. Their voice is now being recognized and systems of state suppression are being modified significantly. Some degree of convergence is seen in the goals of the employment relations policies. Globalisation and changes in international economy have impacted employment relations significantly. One analysis is that globalisation pressurises convergence between different countries in employment relations. However, other analysis is that the institutions of national level play mediator’s role in establishing distinction across nations, which leads to discrepancy. However, some argue that complex interactions between local and global forces shape employment relations outcomes. In developed countries, it is seen that employers' needs have to be met, and economic efficiency needs to be established to generate profits. So balancing efficiency of the economy and social equity is quite important for maintaining good employment relations. Globalisation has created certain economic factors that affect employment issues. Regarding the effects of globalisation, according to some economists, there are four key concerns that influence employment relations: 1) Competition from developing countries in the international markets has resulted in growth of unemployment and disproportionate wages for unskilled and untrained workers in developed countries. 2) Importing from developing countries exerts pressure on the manufacturing sector in developed countries. 3) Foreign direct investment (FDI) is likely to be more in developing countries than the developed ones. (UNCTAD 2008) 4) Liberalization of the economy results in unemployment and disparity of wages in developing countries because job losses in not so competitive industrial sectors are far more than job opportunities in new industrial sectors. 5) Due to globalisation and deregulation of labour markets, workers are forced to accept low wages and worsening conditions due to increased international competition. 6) Globalisation reduces the autonomy of developing countries. Capital becomes more mobile and the government's control over regulating economic activity is reduced. On an average 70% of the total work force in developed countries is employed in the service sector primarily consisting of non-trade activities. Therefore, workers in developed countries are forced to acquire more skills and trades to find employment and survive. This result in a change in trends of employment and the workforce has evolved as a very diverse and assorted labour force that is growing involved in non-standard types of employment. (Markey, R. et al. 2006). The deregulation of labour markets resulted in slashing of wages and more unequal income distribution in all countries. The transition from corporate governance system to market economy system resulted in the explosion of income of managers and top executives. The purchasing power of the workers has decreased whereas the markets are driven by unstable demand of the rich classes. Everyone agrees that the flexibility in labour markets can solve problems of unemployment. However, in reality, flexibility in labour markets has added to inequality, instability, and uncertainty. The governments have to rethink on strengthening the minimum wages regulations once again and have to curb non-proportionate distribution of wages in the hands of the top management. References Anne O. Krueger, 2006, Economies for the 21st Century, At the 10TH St. Petersburg International Economic Forum, St. Petersburg, Russia Book - The Major Text and Essential Reading by Bamber, G., Lansbury, R. and Wailes, N. (eds) 2004, International and Comparative Employment Relations: Globalisation and the developed Market Economies, 4th edition, St Leonards, Allen & Unwin Book - Why Deregulate Labour Markets? Edited by Esping-Andersen, Gøsta and Regini, Marino Retrieved Oct 14, 2009 from http://www.oxfordscholarship.com/oso/public/content/politicalscience/9780199240524/toc.html Economic Globalization: Trends, Risks and Risk Prevention, Gao Shangquan, 2000. Retrieved Oct 14, 2009 from http://www.un.org/esa/policy/devplan/cdpbackgroundpapers/bp2000_1shangquan.pdf Eddy Lee, Marco Vivarelli, 2006, The Social Impact of Globalization in the Developing Countries, IZA Discussion Paper No. 1925 Definition of employee relations? Retrieved Oct 14, 2009 from http://wiki.answers.com/Q/Definition_of_employee_relations Impact of globalisation on industrial relations in the EU and other major economies, by Kaia Philips and Raul Eamets Retrieved Oct 14, 2009 from http://www.eurofound.europa.eu/pubdocs/2007/85/en/1/ef0785en.pdf Labour Market Trends and Globalization's Impact on Them Retrieved Oct 14, 2009 from http://actrav.itcilo.org/actrav-english/telearn/global/ilo/seura/mains.htm Glyn, A. and Sutcliff, B. 1992. "Global But Leaderless? The New Capitalist Order," in Ralph Miliband and Leo Panitch (eds.), New World Order: The Socialist Register. London: Merlin Press. Reddy, S. (2004), Globalization, Labour Markets and Social Outcomes in Developing Countries, in Lee, E. and M. Vivarelli (eds.), Understanding Globalization, Employment and Poverty Reduction, Palgrave Macmillan, New York, pp. 309-26.. UNCTAD (2008) World Investment Report 2008: Transnational Corporations and the Infrastructure Challenge (New York and Geneva: United Nations), p. 105. William Robinson and Jerry Harris, 2000, THE JOURNAL SCIENCE AND SOCIETY, VOL. 64, NO. 1, SPRING 2000, PP. 11-54 Read More