The Impact of Globalisation on the Australian Labour Force - Literature review Example

GLOBAL ISSUES FOR АССОUNTING: THE IMPACT OF GLOBALISATION ON THE AUSTRALIAN LABOR FORCE Name Institution Professor Course Date Executive Summary In the past few decades, the economy of Australia has been greatly subjected to globalization forces. The dissolving of trade barriers, hyper-motility of capital, rapid diffusion of information technologies and financial deregulation have led the economy of Australia into the borderless world. There has been a qualitative change in the temperament of international labor migration. This report underlines the impacts of globalization on the Australia labor market. The report ascertains that deregulation of the Australian labor market to attain competitiveness in the global market aggravate wage inequality. With circumscribed employment rights, and the augmented importance of temporary migrant workers, globalization has provoked a more intense labor commodification. Employees in Australia fear being displaced by cheap labor from migrants. Globalization has lowered obstacles to mobility of labor across economies and nations thereby instigating demand for highly skilled employees. The combination of these factors has augmented competition for highly skilled labor across national boundaries where the demand for domestic highly skilled labor outshines the available domestic labor supply. While globalization augments economic growth, financial capability migration and capital flows, it impedes wage flexibility leading to high unemployment and social collapse. The government should implement policies aimed at skill accumulation besides social welfare polices entailing negative income taxes to prevent deleterious social impacts arising from wage inequality. Table of Contents 1.0 1.0 Introduction The economic gains from globalization are indisputable. However, these gains are perceived to been unevenly distributed with and between nations. The rise flow of capital and trade has increased the feeling of vulnerability. Employees in industrialized nations such as Australia fear being displaced through cheap labor from less developed nations. Globalization is usually linked to greater unemployment rates, wage inequality, labor migration and commodification, and social collapse. However, Lofgren (2009, p.13) asserts that globalization has lowered official unemployment rates in Australia. 2.0 Defining Globalization Globalization is a term utilized to explain a wide range of social and economic shifts. It holds cultural, political, economic, environment and social dimensions. Globalization presents a novel step in the procedure of internationalization and the transmission of international production. It entails a set of emerging conditions in which wealth and value are distributed and produced within global corporate networks. According to Ritzer (2009, p.2), globalization is increasingly ubiquitous and a very crucial change. Globalization entails a set of procedures engaging augmenting liquidity and the growing multidirectional flow of persons, places, information, objects and the structures they stumble upon and form. According to Anderton and Kenny (2010, p.227), a major characteristic of the current phase of globalization is its comparatively powerful indirect effect on domestic labor markets otherwise known as the “threat” effect. Given that this threat effect surpasses the actual import penetration numbers, degenerating actual trade data on labor market indicators cannot describe this potentially important globalization impact. Dreher and Martens (2008, p.140) underlines the distinct dimensions of globalization which include social integration, political integration and economic integration. 3.0 Globalization and the Labor force in Australia The deregulation of the financial markets, liberalization of trade barriers, diffusion of information technologies, and transports reductions ushered the economy of Australia into the borderless world (Teicher & Gough 2013, p.5). For almost a century, the economy of Australia had been insulated through the trade protection policies, centralized wage-fixing and discriminatory immigration. However, the emergence of the global world, technology pressures and competitive trade coming from globalization instigated insightful shifts in the macroeconomic landscape of Australia. The labor market of Australia reacted slowly to the pressures of globalization. Through the later era of the Prices and Incomes Policy of 1983, the government of Australia deregulated the labor market changing it from centralized wage bargaining to individualized contracts under the 1996 Workplace Relations Act (Bowles 2013, p.25). The institutional setting of the labor market of Australia reacted to the techno-economic pressures emanating from the borderless world through formulaic rigidity image. The wages of highly skilled labor and that of low skilled labor reacted to technological and trade shifts. In the 1980s, Australia joined other industrialized nations in deregulating its economy and reducing barriers to trade with other nations. Deregulation of the labor market has been one major aspect. The procedure of deregulation of the labor market, foreign trade and the financial system has removed the establishments of the wage earners welfare state (Furze & Lie 2012, p.146). 4.0 Impact of Globalization 4.1 Wage Inequality According to Dyster and Meredith (2012, p.277), there are number of specific areas where reforms that promoted globalization affected the economy of Australia in the final quarter of the 20th century. One of these major effects was income inequality. Income distribution in Australia narrowed following the post-war period, then broadened in the 1950s and 60s before narrowing again in 1970s. In mid 1970s, incomes were as equal as there were in 1949. Thereafter, income inequality developed swiftly so that by 1990s, the ratio had increased to 2.31 and by 1998 to 2.5 amounting to arise of forty five percent. This precipitous rise in income inequality was instigated by reduced economic growth, labor market reforms and higher unemployment that change Australia from wage-fixing while collective bargaining suppressed the growth of income among low-income earners. Financial and commercial deregulation and structural changes in employment from manufacturing to services and from public to private sectors augmented average incomes at the top end (Dyster & Meredith 2012, p.278). The occurrence of membership of trade union changed by 1990s, and the proportion declined to 41 percent from 56 percent in 1950s. This drop mirrored structural changes in the economy of Australia besides centralized wage-fixing reduction. It also eliminated lower-paid workers source of income. As this rise in income inequality took place alongside globalization intensification, and scores of reforms that promoted the increase were justified thereby making Australia more competitive in the globalised economy. In this regard, the effect of globalization on Australia included a rise in income inequality. Dreher and Martens (2008, p.140) asserts that while powerful sectoral unions practice wage gains relative to some perceived market wage, leading to cost-push inflation, lower growth, inter-sectoral inequality and lowered employment, centralized unions acknowledged these negative externalities. As unionization decreases, there is proof of increase wage inequality. However, not all workers in developed nations lose out in terms of income and wage. Highly skilled employees in the high-tech industries have wage increases (Jean-Yves 2008, p.104). Moreover increasing wage inequalities does not stem from globalization alone. For instance, in the U.S.A, wage inequality was instigated by lowered power of unions besides globalizations (Jean-Yves 2013, p.105). 4.2 Floating of the Dollars and International Capital Controls Dyster and Meredith (2012, p.278) assert that there were numerous impacts of globalization in Australia in 1980s and 1990s. One of the impacts was the floating of the dollar as well as the removal of international capital controls that affected the Australia’s balance of payments. The removal of these controls enabled Australia to run huge current account deficits between 1980s and 1990s. The deficits were importunate and never came down when the rate of exchange fell in the mid-1980s. In 1990s, the current account attained high levels notwithstanding fiscal consolidation through the commonwealth. Given that the deficits were funded in the 1980s through borrowing instead of foreign equity venture, the external debt of Australia soared making Australian creditors to lose confidence and stopped financing the current account deficit. In the end of the 20th century, foreign lenders loss of confidence manifested in augmented borrowing and downgrading exchange value of the Australian dollar. 4.3 Unemployment Towards the end of the 20th Century, employment creation had played a crucial role in maintenance and erection of a high tariff regime in Australia. However, the great deal of the structural adjustment fell on the labor market. Almost all manufacturing sectors lost labor and, manufacturing employment contracted by nearly a quarter (Dyster & Meredith 2012, p 283). In clothing, textiles and food industries, labor force was lowered by competition from cheap imports. Lower tariffs instigated by globalization had an indirect and direct effect on employment. Direct effect was instigated by increased competition from low-cost suppliers while indirect effect emanated from investment to compete against imports that led to shedding of labor. Lowering tariffs lowered job prospects in manufacturing as firms invested on cost-saving technology to compete against imports (Dyster & Meredith 2012, p. 283). Jean-Yves (2013, p.104) claims globalization lowers competitiveness of some industrial sectors such as textile in developed economies, hence job losses in these sectors. However, it is difficult to assess the effect of globalization on volume of job globally. Openness of the global market does not lead to loss of jobs. Looking at OECD nations since 1990s, employment levels were high before as their economies were greatly integrated. After a zenith in 2000s, the unemployment rate dropped. By 2007, the average unemployment rate in OECD nations dropped to its lowest (Jean-Yves 2013, p.104). 4.4 Commodification of Labor According to Stuart (2010, p.99), there has been developing interest over the last decade in the import of global migration as an economic force that could offer renewed development potential for developing nations. A migration-development discourse determines the potential that has been provoked through the dramatic rise in the enormity of official documented income which migrants are providing to their home nations. Remittances afford the pledge of promoting economic wellbeing given that the remittances act as a source of capital and foreign exchange that surpasses private global capital flows and official growth assistance to less developed nations. There has been a rise in the class of migrant employees involved in low and semi-skilled, low-paid occupations whose work and residence permits are constrained. Denied permanent entry, temporary migrant employees are subjected to restrained employment period instigated by the need for constant contracts renewal. In this regard, there has been a qualitative shift in the temperament of global labor migration. The institutional arrangement that frame new global employees terms of engagement with globalization are contributing to dynamics of international money transfer (Struat 2010, p.100). The liberalization of the global labor market has instigated temporariness acceptance in Australia and other developed nations. In the global Economics Prospects of 2006, the World Bank agrees that the free international flow of people is an extremely sensitive concern that governments must manage and not an issue to be circumnavigated. The World Bank supports temporary labor migration aimed at handling labor shortages that do not call for governments renouncing border control (Struat 2010, p.102). In 2009, Australia cut is skilled migration program by fourteen percent (Brian 2009, p.56). 5.0 Conclusion and Recommendation In Australia, globalization has been embraced by economic and political elites. Globalization in this country is linked to rapid economic growth, but also developing disparities and political and social tensions. The impact of globalization on Australian labor force can be viewed in a range of diverse issues that include declining union membership, unions’ hand in upholding conditions and wages besides their efforts to build up strategies to augment membership and retain influence over regulation of employment. The development in wage inequality and insecure employment is stimulated by employers’ drive to augment flexibility and lower costs of labor. Globalization also causes temporary immigrant labor and floating of the dollar. Therefore, the Australian government should implement policies aimed at skill accumulation besides social welfare polices entailing negative income taxes to prevent deleterious social impacts arising from wage inequality. 6.0 Reference List Anderton, R & Kenny, G 2010, Macroeconomic performance in a globalizing economy.UK: Cambridge University Press. Bowles, P 2013, International trade and neoliberal globalism: Towards re-peripheralization in Australia, Canada and Mexico. UK: Routledge. Brian, K 2009, OECD insights international migration the human face of globalization: The human face of globalization. UK: OECD Publishing. Dreher, A & Martens, P 2008, Measuring globalization: Gauging its consequences. Netherlands: Springer Science & Business Media. Dyster, B & Meredith 2012, Australia in the global economy: Continuity and change. UK. Cambridge University Press. Furze, B & Lie, J 2011, Sociology in Today’s world. UK: Cengage Learning. Jean-Yves, H 2013, OECD insights economic globalization origins and consequences: Origins and consequences. Australia: OECD Publishing. Lofgren, H 2009, The politics and culture of globalization: India and Australia. New York: Berghann Books. Ritzer, G 2009, Globalization: A basic text. UK: John Wiley & Sons. Stuart, R 2010,” Globalization and the commodification of labor: Temporary labor migration”, The Economic and Labor Relations Review, 20, 2, pp.99-110. Teicher, J & Gough, R 2013, Australian workplace relations. UK: Cambridge University Press. Read More