Globalization and the Australian Labor Force - Literature review Example

The Impact of Globalization on the Australian labor force Name Institution Course Date Executive summary The objectives of this paper is to look globally and empirically the relation between the labor market and globalization. In a more specific manner, it tries to look into the impacts of economic globalization on the Australian labor market and therefore contribute to the discussion on the effects of globalization on the on the global economic situation and in particular the labor market. There have been a lot of literatures that scrutinize the relationship between economic globalization and the labor and work informality. This paper will look at the economic effect of globalization on the Australian labor market. Introduction Globalization is nothing new, from the time when Australia was founded as a colony; it has been involved in financial flows, migration of labor, investment, trade and technology transfers. The things that have changed are the direction, influence and size of these transfers particularly beginning 1980. The factors that have helped this transformation include: the growth and development of new markets, new institutional players like the World Trade Organization, new regulations and restrictions and the new tools and innovations of globalization. There are many effects of Globalization which affect different aspects of the global economy to create a generally financial betterment. Globalization effects apply great influence on the financial situations in addition to industrial industry of a particular country. This essay will try to look at the relationship between the two and the effects of globalization on Australian labor force. Globalization economics According to Economy watch (2010a), Globalization has one way or another basically benefited the economy of Australia. Australia has a wealth of natural resources that the whole population is not capable of utilizing, the surplus resources are sold to other nations that require the resources thus giving Australia a global market of more than six and a half billion people (Economy watch, 2010a). Australia has a stable government and extensive revenue, globalization has been positive in many ways. As many developing countries have fallen into debts, Australia has not been part of that cycle and has not been negatively affected by terrible investments. The Australian economy has been strong during the globalization period (Economy watch, 2010b). Skwirk.com (2012) states the global trade hypothesis can be valued as a measure to tackle the problems in the nation where there has been high inflation, weak macro economy or high unemployment. One global trade theory is identified as mercantilism which suggests that the government can advance its economic welfare of the nation through reducing imports and increasing exports (Skwirk, 2012). The other two major trade theories are referred to comparative advantage and absolute advantage. When a nation has an absolute advantage above its trading collaborators, they are in a position to produce extra goods and services using the same quantity of resources or the same quantity of goods and services using lesser resources. A nation which has comparative advantage in the manufacture of goods and services, manufactures it at a lesser opportunity cost than its market partners (Skwirk, 2012). Treasury (2009) reported that the international trade system has a diversity of different implications if not handled in the right manner. Global trade may dampen the development of domestic industries plus extreme exports may lead to high exhaustion of a nation’s natural resources. International trade may create economic reliance, which in turn tends to threaten political reliance if there is extreme competition, exports may create rivalry among countries. The globalization of markets and the growth of international economy have had a distinct impact on the international and Australian economy (Treasury, 2009). There are a lot of benefits to be achieved by means of global trade; nevertheless, if it is not carried out in the right way there could be a lot of consequences. Globalization and the Labor Market Globalization produce markets based on industrial inventions across the globe which in turn enlarges the access to a different variety of foreign goods for utilization of the end users. This is due to the marketing strategies assumed by various organizations. Globalization makes it possible to form a common Global market on the foundation of liberal exchange of both cash and kinds (Economy watch, 2010b). The global movement of labor has ever been expanding since the early 1960 (Economy watch, 2010b). It is estimated that around 2.5% of the Globe population reside outside their native countries and 1.5% of the globe working population work in nations excluding those of their citizenship. The trend is on an increasing rate with the internet creating an opportunity for skilled people to submit applications in almost every nation on the globe. Newspapers, for example Sydney Morning Herald or Australian, present Australian teachers’ job placement in countries like Indonesia, England, USA, Canada, Saudi Arabia and China with more than double the salary they currently get. High salaries offered oversees, are drawing high skilled labor from Australia, mainly due to the recent low value of the Australian dollar. This trend is likely to grow huge due to the expansion of the global economy (Economy watch, 2010b). According to Dreher,Martens & Gaston (2008), the other component of globalization is about the possible impact of adjustments in the world market on economies. That would mean businesses considering the possible entrance of global competitors into their market. Organizations plan pricing policies and employment strategies considering what could ensue if cheap overseas producers enter the market. This means that the organizations quit the market, or threatens to start up their businesses in nations where profits are projected to be highest. For example, low wage nations, where unions are censored and there exists low organizational tax rates(Economy watch, 2010b). Employees and governments make use of these fears to push for workplace and labor market reforms. This has happened in Australia where there has been a growth of casualisation and individual contracts in the work force. The high skilled laborers benefit from this while the marginalized and low skilled labors loose due less job security and poor working conditions (Felbermayr, Prat & Schmerer, 2008). According to Dreher, Martens & Gaston (2008), the growth of globalization has started a dynamic argument in economics regarding the consequence of trade liberalization on labor trade. There has been a lot of literature about this issue, but we focus on the argument about the consequences of trade liberalization on employment and wages. The activists of trade liberalization plus globalization mainly have a debate about the gains from trade, removal of dead weight losses, competitive advantage and efficiency gains. Nevertheless, there is minimal indication relating to income allotment effects of policy recommendation based on the global trade patterns and also there is no great attention paid to the changes in the labor market that come as a result of trade guidelines (Singh, 2012). There has been a high growth in the casual labor markets in the Australian market and a widening gap on the sharing of wages mainly as a result of the strong development in employment in high wage occupation as opposed from an extension of inter-occupational wage disparity. Inter-occupational wage disparity seems to be slightly strict in Australia, and the reasonable debate is that this might have in one way or another has increased the unemployment rate between unskilled laborers (Singh, 2012). Labor markets have by no means been rigid in Australia. However, recently there have been major changes due to globalization. Investors nowadays can move around the globe freely looking for new markets and places with reduced labor costs. Common markets agreements, new technologies in information and freer trade have forced a number of industries and laborers out of the market and on the other hand have permitted other to flourish (Singh, 2012). Production jobs that were initially unionized have lost their protection of the unions and moved outside the western economy borders to less developed countries while at the same time the sectors that offer services have expanded giving more part time rather than full time jobs in Australia. In Australia, there has been a change in employment opportunities; most of the workers have been required to train again, be self employed or accept early retirement. The jobs those are available to the fresh labor markets contestants and the ones looking for re-entry particularly have been changed. Some newcomers are sufficiently lucky to get long term and stable employment while others only land temporary or part time jobs that are not protected by the union, lack employment benefits and regular working hours (Felbermayr, Prat & Schmerer, 2008) Australian labor markets are more and more being classified into “bad jobs” and “good jobs” and this has effect of the increase in wealth and income inequality. This results in a comparative fall in real income against taxes and inflation. Most Australian families require different sources of income so as to be in a position to meet their basic needs. Social welfare costs and poverty have increased by the high rate of unemployment in addition to job insecurity. The response of federal government has been restriction of access to social benefits in additional to creating welfare to work or else employability plan that will need increasingly beneficiaries to keep hold of and look for paid job or surrender a part of the social security benefit (Gruen, 2011). Conclusion There has been a growing anxiety in the Australian community about the manner in which globalization is regulated in the welfare of large organizations. The consequences of the procedure of de-regulation, elimination of controls on the progress of capital, free trade and privatization are becoming evident. Globalization can be considered as a positive for Australia considering its great reliance on international trade and investment for its continual economic growth. The superior exposure to the global market has built confidence in the Australian organizations to create new techniques and better product development. The growth in technology that has spread throughout the economy helps the rise in national productivity as well as increased income levels. For Australia to continue enjoying the payback of globalizations, they are required to support the strategies support liberalization of trade and those that support the labor laws (Economy watch, 2010a). The Australian service sector that presently accounts greater than the 75% of the total employment are predicted to go on expanding to meet the growth of domestic and global demands. Employment in Australia is projected to increase by more than 30% by 2030 due to globalization (Gruen, 2011). References Dreher, A., Gaston, N & Martens, P 2008, Measuring Globalization – Gauging its Consequences, New York, Springer. Economywatch.com 2010a, “Effects of Globalization”, Viewed August 15, 2014 http://www.economywatch.com/economics-theory/globalization/effects.html Economywatch.com, 2010b, “Benefits of International Trade” . Viewed on August 15, 2014 http://www.economywatch.com/international-trade/benefit.html Felbermayr, G., Prat, J & Schmerer, H 2008, Globalization and Labor Market Outcomes: Wage Bargaining, Search Frictions, and Firm Heterogeneity,‖ Institute for the Study of Labor. Discussion Paper 3363 Gruen, D 2011, ‘Economic and financial trends and globalisation over the next 15 years and how they will influence the supply and demand for skills’, Viewed on August 15, 2014 http://www.treasury.gov.au/PublicationsAndMedia/Speeches/2011/Economic-and- financial-trends Singh, S 2012, “What are the Disadvantages of Foreign Trade?”, Viewed on August 15, 2014 < http://www.preservearticles.com/2012022923900/what-are-the-disadvantages-of-foreign- trade.html Skwirk.com 2012, “Globalization in Australia”, Viewed on August 15, 2014, http://www.skwirk.com/p-c_s-57_u-507_t-1374_c-5292/globalisation-in- australia/qld/sose-geography/the-global-citizen-ecology-and-economy/globalisation Treasury 2009, Implications of the Globalisation of Financial Markets, submission to the House of Representatives Standing Committee on Economics, Finance and Public Administration: Inquiry into the Implications of the Globalisation of International Financial Markets for Macroeconomic Policy and the Operation of Financial Markets, viewed on August 15, 2014, http://www.aph.gov.au/house/committee/efpa/ifm/subs.htm Read More