Globalization and Employment in Less Developed Countries Manufacturing Sector - Research Paper Example

? Globalization and Employment in Less Developed Countries’ Manufacturing Sector Outline Introduction 2. Economic Globalization: Pros and Cons 3. Statistical Factors and Employment Globalization Analysis 4. Conclusion and Recommendations Executive Summary The paper is focused on the issues of globalization and unemployment. There are different ways of globalization influencing on employment patterns in manufacturing sector of less developed counties (LDCs). The paper deals with the impact of economic globalization on employment patterns. Both governmental and economic issues are discussed. On the example of relevant studies and researches, a special attention is paid to the influence of globalization in LDCs’ manufacturing sector. 1. Introduction The modern phenomenon of globalization is a wide-spread issue for the discussion in numerous researches and studies. It cannot be denied that various dynamic phenomena are correlated with this background. The limits of different nations are blurred and it is appropriate to focus on specific criteria for development of different employment patterns, which differ from the ones, which existed previously. Actually, there are many different aspects of globalization and we will further focus on economic globalization. With respect to it, we found it necessary to define the phenomenon of economic globalization: “Economic globalization refers to the increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies. It reflects the continuing expansion and mutual integration of market frontiers, and is an irreversible trend for the economic development in the whole world at the turn of the millennium1 ” It can be surely claimed that the development of technologies and flow of international capital across different countries enable foreign markets to create a great number of new jobs. Employment goes at a full pace, but very often this process evokes numerous different reactions of the society. On the one hand, globalization has been gradually increasing in the world of economy and different changes happened to foster the processes of globalization. 2. Economic Globalization: Pros and Cons in the Manufacturing Industry of LDCs Let us focus on the economic globalization and its impact on less developed countries (LDCs). In this case we will see the following picture: tariff barriers for international trade became much lower and there is a coming process of a high-speed market development in the world. The world trade, goods and products are on the way of their constant expansion and development. As a result, the cost of transportation and communication around the world are expanding the laws of international regulations. Consequently, conditions of employment for the employees in different fields should be correlated with the options of investments and a free financial flaw. It was found out by Lee (1996) that “there is a significant current of apprehension over the implications of globalization for employment and income inequality.On the face of it this is difficult to reconcile wih the voluntary shift towards a more open world economy in democratic societies, which are also the only countries where the apprehension is voiced”2. Moreover, LDCs have many opportunities to follow credit process line of the government and the global society to improve their production. Less developed firms are encouraged and supported internationally. There are many winners in employment nowadays, but there are many losers as well. Globalization often leads to job losses, but at the same time it can create a number of interesting and prospective jobs. There are different patterns of global trade and employment generation is on the prospective edge of having many opportunities for development. Economic globalization has always intensified changes of employment patterns. This resulted in integration of capital and financial markets. There are numerous factors in globalization, which exert influence on the employment patterns. Firstly, it can be said about the number of jobs available in the economy. The central macro-economic variables (unemployment rate and the employment-to-population ratio) are properly considered on the background of the globalization. For example, the occurrence of offshoring can be positioned both as a favorable and unfavorable employment factor. This can be explained in the following way: if the company moves from one country to another, people in the source country can lose their jobs, while people in a target country can get new jobs3. If this pattern is ineffective in LDCs, then businessmen have a chance to introduce their own economic incentives and open new firms locally. Another factor, which is determined as globalization factor influencing employment patterns, is the structure of jobs. It means that economic activities can produce new jobs or remove jobs of previous years. For example, technological progress can be considered as an important influential factor, which produces a number of innovative jobs in the field of technology and industry. Therefore, other fields may suffer losses of jobs. In accordance with the study by Brooks, Weatherston, Wilkinson (2004) Globalization, challenges and changes: “We can see it in the relocation of manufacturing from more developed economies to those that are less developed, or in the transfer of call centers from the UK to India or from the USA to Puerto Rico. Offshoring will inevitably involve the loss of employment in the country that the business leaves” 4. Nevertheless, the sector of manufacturing in LDCs suffers a lot from lacking of investments and relying mainly on external support of other governments. The composition of jobs is a very complicated task too. Thus, it can be claimed that there are both unskilled and skilled workers. Thus, globalization influences these categories in a different way. Workers from developed countries would be affected by stagnating revenues and a high level of competitiveness from workers from developing countries. Moreover, workers from developing countries are able to obtain a higher quality of education and good professional skills. Migration of employees is another relevant issue, because it is the main reason for people to migrate. Currently, there are many regional agreements, which liberalize the movement of people. Thus, the patterns of specialization are changed and multinational companies are on the way of their high-speed development. In the result of the migration, there is an essential increase of money inflow. It is on behalf of the employers to provide the employees of their companies with friendly job conditions. As Brooks, Weatherston, Wilkinson (2004) claim: “Changes in employment and career patterns have important and far-reaching consequences for pension provision and some welfare payments. With an ageing population, government fears the rising burden of pension and welfare demands upon the public purse”5. In manufacturing industry small-scale and large-scale enterprises go hand in hand and very often they produce competitive products almost simultaneously. Therefore, it is appropriate to consider changes triggered by the globalization in dynamics. With a course of years the changes of employment patterns can be changed and they should be correlated with population’s age, changes in their education, living conditions and other social and economic factors. Another important factor to be considered is employment conditions. This issue is focused on basic components. Thus, in case of economic competition labor costs can be changed too. It was found out that safety requirements are not properly considered, trade unions do not exist anymore, multinational enterprises are on the way of development. A decisive role of the offshoring cannot be denied too. Under conditions of globalization this field is important for new jobs creation6. Of course, manufacturing industry is lacking of appropriate working conditions for their employees. Concerning analytical tools used for discussion about influence of globalization on the employment conditions. Thus, such tools as statistical factors; trade or job content method; econometric models are applied in the process of further discussion. 3. Statistical Factors and Employment Globalization Analysis It can be said that abovementioned factors are effective for a detailed analysis of the labor market. The impact of globalization on employment in a certain country occurs in the result of the conditions of economic globalization. A number of the following factors, which consider technological, demographic or social factors, are also decisive in the discussion of the globalization issues. 7 On the example of the tables, it is evident that different categories of people or countries can find different pros and cons of globalization processes. LDCs can be dependent on labor quality of the employees from developing countries, but they can lose jobs for their own population. The number of jobs in the manufacturing industry in LDCs is the most reliable factor than the global number of jobs. The econometric model assesses the influence of economic globalization on employment. There is another type of influential factors, such as regression analyses (logistic, linear, etc.). These techniques are applied to evaluate outcomes of employment and globalization. There is a lack of proper alternatives and the econometric models can be effective tools for employment/globalization relation measurement. Free markets come across numerous challenges under conditions of globalization. A free market fundamentalism is another strong background for the development of strong relations between the leading companies and the workers from different countries and industries. In accordance with the study of the late 90s, it is evident that there is a clear ration among employment, globalization and welfare8. The explanation is the following one: a demand for welfare is often correlated with the development of free trade. The introduction of big social programs is often directed on improvement of education or any other social issues. Free trade has rarely been positioned as a favorable and a friendly source for compensation. It is often claimed that: “Many countries have a legally enforceable minimum wage, but the consequences may be higher unemployment levels among low-skilled, particularly young, people. In many countries governments are considering age discrimination legislation, in particular to prevent discrimination in the employment of older people”9. There are evident positive effects for manufacturing industry in LDCs in terms of these programs. Cheaper goods and services contribute much into welfare growth. Opponents of globalization claim that the process of relations development between globalization and employment is inevitable. There are increased gains from a growing competition in the global market and in a certain industry. It is possible to illustrate this trend by the following example: “Greater efficiency allows for continued economic expansion and the creation of new jobs and other economic opportunities. Competition yields benefits to consumers in the form of lower prices”10. Moreover, in the developing countries there is an evident inflow of FDI. It is the right way to creation of work places. Globalization proponents underline that the government interventions are required for vital processes improvement. Thus, it is evident that proponents of globalization are focused on a favorable impact of globalization on employment. From the perspective of opponents of globalization, there is even a decline in the outcomes of some families. Thus, American families have witnessed a real decline in their incomes since 70s. It was found out that there are evident trends of inequalities and transnational corporations are gaining money hand over fist, but small businesses are developing under hazardous conditions. There are many rules and regulations, which are often neglected by small firms and companies and attention is paid to demands of mobile companies. The issues of environment are often neglected by large multinational companies. Currently there was an interesting claim about relations of globalization and employment: “As a consequence many organizations have sought to achieve greater flexibility in employment conditions in recent decades. Both employers and employees lead the trend, with governments often regulating, sometimes supporting, and developments via legislation. That said, ‘flexibility’ often means different things to individuals as opposed to businesses”11. In accordance with a popular Heckscher-Ohlin (H-O) model, which is focused on the issues of labor and capital, in case of trade rise, there is an evident rise of labor demand. Thus, developing countries with respect to this model gain much from trade expansion. The issues of unemployment and manufacture are considered in terms of this model, but the result can be different from what is expected. This method is justified and is considered to be “a purely comparative static prediction – the time period is irrelevant since adjustment is instantaneous – and it depends solely on the shift of resources between activities using given technologies, not on the use of different or new technologies”12. Further discussion occurs on the example of this model, because LDCs are mainly focused on export. The impact of liberalization and globalization of trade is very much important for developing countries. Very often developing countries are accused of a low growth equilibrium and deal with low-technology and slow-growing activities. In terms of the neoclassical theory, it is evident that employment is increasing basing on physical factor endowments. In terms of technology gap theories, developing countries can export low technology or traditional products. Thus, employment increase can be dependent on a relative innovative or technological progress. Therefore, concerning globalization and its impact on employment in LDCs, it can be surely claimed that: “globalization can offer many employment benefits to developing countries. In the external world these countries face, markets become more accessible, transport costs lower, information easier to get, technology easier to access and capital easier to raise: this promises more exports, faster transfer of technology and greater investment resources”13. These are favorable and friendly conditions for the expansion of employment. At the local level, if the world economy is integrated closer with the world’s market, then labor-intensity occurs. Employment can increase in case of technology inflows, FDIs, capital and skills expansion, services growth etc. As far as we can see, there are many different reasons, which determine positive changes in employment patterns in the process of globalization. 4. Conclusion and Recommendations Globalization can contribute much to development of employment. A special attention should be paid to developing countries. Rational activities of developed countries across international boundaries can create an effective system of resources exploitation at a higher level. Wealth technologies and competitive enterprises can sustain output, export and employment in different countries. The local budget of the country can benefit much in case the following conditions are performed: wealth of new, highly productive technologies; rapid and sustained output, export and employment growth etc. The only possible way for resources advancement and promotion of the given technologies is globalization development and advancement. In accordance with Brooks, Weatherston, Wilkinson (2004): “Given this immense productive, absorptive, allocative and resource transfer potential of globalization, it may seem that simply opening economies up to global market forces is a good –perhaps the only – way to promote employment and growth today”14.Markets are always effective, especially global markets. They provide many benefits for the poor people and create numerous opportunities both locally and globally. LDCs become open for a free trade. Employment can be reduced and local enterprises can be motivated for cooperation and performance both locally and globally. The growth of employment can lead to competitive advantages at different levels. There is a lack of national capabilities and the globalization in this case exerts a negative influence on welfare of some countries. In the developing world the level of FDI concentration is growing. Concerning global and dynamic development of the international trade and market, it can be claimed that global production systems are very much concentrated. In accordance with the recent studies and researches: “The success stories in the developing world may thus be the exception rather than the rule; their experience may well reflect other factors – government strategy, location or just good luck – rather than the beneficial effects of global market forces per se”15. The process of globalization leads to a sustained growth and there is a need to take necessary measures to continue divergence between the economies of different countries. Therefore, it is possible to summarize the following points about correlation of globalization and employment. The global environment is a complex background for changing development of organizations, individuals, groups and governments. A great number of external factors exert an evident influence on economic, political, technological and social factors. In case of globalization, non-linear patterns of organizations’ functioning can be present. Therefore, changes in employment patterns can be found in the occurrence of such types of works as teleworking, part-time work, temporary work etc. With a changing culture, people’s experiences are changing too. As a rule, the governments of different countries pay attention to changing environment and make many attempts to adopt those changes. Actually, it is evident that global solutions in different fields of human activities introduce a certain degree of changes. Moreover, patterns of employment depend on the organizations’ ability of flexibility and responsibility. References Brooks, Weatherston, Wilkinson. Globalization, challenges and changes (2004). http://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/Brooksch9.pdf Elijah, Obayelu Abiodun. “Effects of Economic Globalisation on employment trend and wages in developing countries: Lessons from Nigeria experiences”. Selected paper for presentation at the twenty second National Conference of Labour Economics organized by Association of Italian Economist of Labour (AIEL), September 13-14, 2007. http://ageconsearch.umn.edu/bitstream/7433/1/elijah.pdf Lee, Eddy. "Globalization and Employment: Is Anxiety Justified?" International Labour Review 135, no. 5 (1996): 485+. http://www.questia.com/read/1P3-11173991. Lipsey, Robert E., and Jean-Louis Mucchielli, eds. Multinational Firms and Impacts on Employment, Trade, and Technology: New Perspectives for a New Century. London: Routledge, 2002. http://www.questia.com/read/108296636. Smith, Christine L. "Employment Expansion and Macroeconomic Stability under Increasing Globalization." International Labour Review 136, no. 2 (1997): 277. http://www.questia.com/read/1P3-16420776. Smith, Ian G., and Yaw A. Debrah, eds. Globalization, Employment, and the Workplace: Diverse Impacts. London: Routledge, 2002. http://www.questia.com/read/108220011. Shangquan, Gao. Economic Globalization: Trends, Risks and Risk Prevention (2000). http://www.un.org/en/development/desa/policy/cdp/cdp_background_papers/bp2000_1.pdf Verme, Paolo. "Understanding Globalization, Employment and Poverty Reduction."International Labour Review 144, no. 3 (2005): 348+. http://www.questia.com/read/1P3-982979811. Read More