Globalization as the Primary Cause of Rising Income Inequality in Developed Countries - Essay Example

Globalisation and Income Inequality

Introduction

Indeed, globalisation has enhanced the rising income inequality in the developed countries. Globalization has completely changed the dynamics of trade and investment in the developed countries (Haugen and Mach, 2010, p.10). The question of whether globalization has suddenly turned into a social evil is one thing that economists have to battle constantly with. The rise in technology can be attributed to globalization because, in essence, it has turned the world into one global village. What this means is that people can easily conduct businesses and invest overseas with tiny bottlenecks (Haugen and Mach, 2010, p.5). In the past, more people moved to the developed countries in search of greener pastures and some tried to run away from their insecure countries. Unlike in the developing countries, the industrialized states like America value their skilled personnel, and they compensate them very well. The labor market in America is a mixture of all person from all over the globe, and this is also threatening the autonomous state of the country.

The issue of immigration has been a thorn in the flesh for most Americans who then feel that the immigrants are taking what rightly belongs to them (Ritzer, 2010, p.20). Most of the American Asian immigrants enter America with their expertise as most are well educated and those who aren’t are well skilled; something that threatens the stability of most Americans. The citizens feel that globalization has brought about income disparity, and they are no longer confident that they can sustain their jobs. The Gini coefficient is one indicator that clearly shows that there is a wide gap in the income distribution, something that can be attributed to globalization (Sheng, 2015, p.423). The situation is worsened by the fact that insurance has not been intensified as most people are left to cater for their insurance needs and even their retirement benefits. This research aims at actually evaluating whether globalization has hastened income inequality and review ways which the developed state can use to lessen the gap between the high-income earners and the low-income earners. Also, the study will also seek to find the main drivers of income inequality and the effects that may have on the citizens.

Education

Educational level is the one factor that seems to separate the high revenue earners from the low-income earners. Having a good degree of education means that one can think independently and even implement decisions, without constant supervision. The industrialized states desire to take a workforce that is well learned and that which would handle instructions with ease.it is evident that a Ph.D. holder will earn more money than a mere high school drop-out. With the rise in technology, most nations have changed focused from being labor intensive to capital intensive; this means that if a company has to hire an individual, then they have to have the extra knowledge and more skills than an ordinary person (Hellier and Chusseau, 2010, p.1029). Technological advancements have indeed enhanced and even improved on the production, but it continues to disadvantage the low-income earners as everything is automated and there is, therefore, no need to have someone do them.

The capital intensive companies thereby seem to benefit more together with the educated people like the two correlate with each other. Due to globalization, companies always hire the best from whichever country as long as they can perform. The natives, however, feel that getting human resource from outside their state seems to deny them the job opportunities that they so need (Hellier and Chusseau, 2010, p.1030). Most immigrants flee from their countries in search of greener pastures and what would otherwise be termed as brain drain. Most of the developing countries cannot adequately and well compensate highly skilled profession like that of medicine, engineering and architectural. Developing countries continually train their citizens in the mentioned processioned, but they always seem to lack enough personnel in their hospitals. The rise in automation has brought about the need to have skilled personnel in the technological world (Matutinović, 2006,201). The machines have to have someone operating them and, unfortunately, that is directly related to the education level. With the constant innovation and inventions in the modes of production, fewer people are needed in the workforce, and this has further widened the gap between the high income and low-income earners.

Labor market

Notably, most immigrants are often young people full of energy and vigor who then tend to replace the old generation in the offices; it becomes so much easier dealing with the young ones as they can easily take instructions without even feeling intimidated. Some of the immigrants are always ready to work for a very small fee as compared to the natives who demand very high compensation (Sheng, 2015, p.430). The young generation of workers seems to push the older generation out of the workforce. With immigration, employers do not have to struggle with getting the right employees, and the high competition has suddenly pushed the wage rate down. Sometimes the labor market becomes flooded, and staff chooses the immigrants over the natives as they are cheaper to maintain, and they also do not demand much in terms of pay (Sledge, 2006, p.79). For some, working in America for example and getting the opportunity to be there is good enough for them.

Dealing with immigrants would entail enhancing the skills of the native, and this would empower them and ensure that their services are irreplaceable (Jaumotte, Lall, and Papageorgiou, 2013, p.274). The national government can take it upon itself to train the young people and enroll them in various courses which would then equip them with the right skills needed in the workplace. It would also be advisable to ensure that every worker is entitled to insurance and a benefits retirement plan all aimed at ensuring that even if the older generation were to retire, they would not be left penniless after putting in so much work for the many years. The industries that have unskilled workers have further gone ahead to replace them with the skilled immigrants who also tends to bring about income inequality (Harjes, 2007, p.5).

Investments

Globalization in general entails investing in other nations and integrating other countries in one’s trade (Huwart, Huwart, and Verdier, 2013, p.15). Powerful nations like America has invested heavily in other countries mostly African, which later guarantee them of regular returns. The downside that is associated with investing in Africa is that the resources are utilized outside the country, and, therefore, the natives do not get to enjoy them. Offshore investment only tends to benefit the few rich people, but it does not in any way benefit the poor people. When nations invest in other nations, they tend to employ the nationals there, and this means that American citizens are often disadvantaged regarding employment (Zhou et al., 2011, p.11). The employed people seem to enjoy the high salaries while some Americans are left jobless at home. When the investors employ the Americans in their companies, they tend to pay them highly, and this also brings about the disparity between the high and low-income earners. The volume of world trade has also widened with more investors importing cheaper products which tend to compete with the locally available goods (Daisaka, Furusawa, and Yanagawa, 2014,614). When the imports are consequently cheaper that the locally made good, people prefer to buy them, and this affects the local industry thus even affecting their local jobs.

Competition

Globalization has three dimensions which include investments, trade, and immigration (Baffour and Amal, 2011, p.125). When countries are actively involved in a trade, it means that they have to engage in specialization so as to have a competitive edge. Specialization in itself requires a certain set of skills which means that the workers have to be highly skilled to continue functioning. The services that are deemed unproductive are stopped for a while as the countries focus on the income generating products. When the lowly skilled workers are unable to adjust themselves to work in the specialized fields, they lose out on the job further widening the gap between the low and high-income earners (Fiorentini& Montani,2012, p.23). The competition that the industrialized countries normally face come from the differences in the mode of production and this then pushes the companies to adopt the capital intensive one to hasten their input and even make their products better.

The only winners in this game are the workers who can are flexible and mobile enough to work in any company. The developed countries ought to invest in training and further training; this will ensure that workers can utilize their talents in any place and thus not lose out on any jobs (Daisaka, Furusawa and Yanagawa, 2014, p.620). Seeing that the correlation between qualifications and personal income is so high, individuals should aim at improving their skills to be competitive enough in the job market (Balan, Torun and Kilic, 2015, p.10). Every citizen must possess the necessary skills of reading and writing and even aim to be better even specialize in a certain field. Education is, therefore, a one off thing but something that one must always seek to cultivate in their lifetime.

Conclusion

In conclusion, the issue of income inequality has to be approached with caution if the issue is to be solved in any way. Globalization is meant to make the world a better place despite having its set of challenges. Indeed, globalization has speeded up trade among nations, enhanced investments, and allowed people move to other places looking for greener pastures. It would be necessary for the developed countries to come up with policies that will cushion the natives from losing out on the jobs. The policies should be put in place to ensure that there is a certain minimal wage put in place, and, therefore, no employers should pay their workers below a certain mark. Strong tariffs should also be imposed on all imports to ensure that the incoming goods are not way cheaper than the local one thus threatening the existence of the local industries which ultimately translates to low jobs for the people. Having a safety net for the natives will also go a long way in ensuring that even when workers are laid off, they can still survive and also manage to acquire their basic amenities.

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