Globalization and Unemployment - Literature review Example

Globalization Issues Introduction The committee should address the following issues: Globalization and Unemployment; globalization and inequality and globalization and security. Some other issues that should be address are global warming, conservation of endangered species and animal conversation. However, the issues mentioned above such as, unemployment and inequality need to be addressed because it covers both develop and developing countries. Additionally, issues like security are more important to be addressed first so as to give way to look at other issues. For example, living in an insecure world with wars and terrorist will not be possible to address cases of global warming. The point here is that some issues should be prioritized followed by other issues. The next paragraph show analysis of each issue and gives reasons backing the need of addressing such issues. Globalization and Unemployment Researchers, academic experts and economist define globalization as the integration of markets across the world. The results of globalization are evident from the past few decades. Transport costs, tariffs and transactions costs have reduced drastically due to the emergence of sophisticated technologies and managements expertise. Globalization has brought changes that are hard to imagine. For example, developing countries such as China and India have witnessed sustainable economic growth for the past few decades. According to Spence (2011), China is among other 13 countries that have sustainable economic growth of approximately 7% in the last two decades1. Additionally, the author noted that the income level in developing countries has risen close to the level of income in developed countries. For the past few years, the impact of globalization on employment and wealth distribution was good. Spence (2011) acknowledge that, developed countries had uniform economic growth of 2.5%. The result of economic growth witnessed in those countries was increasing the number of employment opportunities. States previously affected by World War II emerged from rubbles and developed. The economic growth led to increasing number of cheap imported goods. The benefits were shared by consumers in both developing and developed countries2. Within a short time, the economy of developing countries grew, they became rich and large. This was due to change of their economic structures. The change of their economic was brought increase in their value-added chain. Countries like China and India started developing products and offering services similar to advance economies. This was not common in previous three decades, but move up of their value-added chain resulted to such changes. The change that saw the move by emerging economies to production of high-valued components led to a significant impact of the world economy. Employment, price of goods and wages has been affected by globalization due to change or relocation of supply chains3. According to Spence (2011), The U.S. policy makers thought that the U.S. economic growth and employment were parallel. This was after World War II. However, to their surprise things changed. Global economy brought changes to the U.S. employment. The United States economy and employment started deviated from each other. This was due to growth of other developing countries such China and India. For example, previously, the U.S. dominated the market in manufacture and exports of products such as pharmaceutical, semiconductors and information technology. However, emerging economies became more competitive in those areas. Additionally, jobs opportunities in the U.S. started reducing due to shift away from growing sectors to sectors experiencing less growth. The result was that unskilled workers started losing jobs. The less number of jobs to less experienced workers led to inequality in income and job opportunities in most parts of the United States4. Most firms relocated a large number of jobs to emerging markets such as India and China 2001 recession that affected advanced countries. Some of the jobs that were relocated to overseas companies include call centers, accountant jobs and computer programming. This affected the U.S. labor market that was expecting increase in job opportunities after the recession (Groshen et al. 2005)5. Most of the people in the U.S. viewed that outsourcing of jobs to international companies is the cause of unemployment. Conversely, international trade has had a significant impact on the United States labor market. Previously, trade had a small effect on the superpower labor market. This was due to small percentage of imports from low-waged countries. According to Autor et al. (2013), imports to the U.S, developing countries was approximately 9% in 1991. However, due to integration of markets and change of policies in emerging markets such as China, imports to the U.S. have so far increased. A study by the authors shows that imports from low waged countries increased even more as compared to previous time. Imports from developing countries climbed from 15% in 2000 to 28% in the year 2007. Additionally, studies by the Autor et al. (2013) show that a large percentage of the imports were from China, approximately 89%6. Furthermore, the U.S. increased its spending on products from China. Autor et al. (2013), point out that, spending on Chinese products by the U.S. accounted to 0.6% in 1991. However, this figure rose significantly to 4.6% by the year 2007. The change of policies in China and its integration to the world market brought changes in advanced economies. For example, a portion of the U.S. employees in manufacturing firms decline drastically from 12.6% to 8.4%. This shows that, emerging markets such as China and India have had a huge impact on the U.S. labor markets. Additionally, the study by the authors show that China experiences current account surplus of 5% of the GDP in 2000. Conversely, the U.S. experience similar negative rate, 5% deficit of GDP. As a result, the industries in the U.S. have experience tough competition from the products shipped into the country from China. On the other hand, increase of imports to the U.S. does not mean that exports increased or are on the verge of increase7. The case of offshoring mentioned earlier above is a cause of unemployment in some countries especially, advanced economies. A study by Gorg (n.d), shows that off shoring is likely to generate unemployment because a number of workers lose their jobs. However, the effect of offshoring varies from one country to another. According to the author, countries like Germany, France and UK have experience close to 10% cases of unemployment due to offshoring. However, some countries experience high percentage of job loss as a result of offshoring. For example, research shows that, Australia, Denmark, Slovakia Republic and Portugal have witness high percentage of job loss due to offshoring. The study also notes that job loss and creation in advance economies is due to a shift in availability of job opportunities away from manufacturing to services industries8. This case is similar to the U.S. previously mentioned above, that saw reduction of employees in manufacturing firms. Additionally, Spence (2011), acknowledge that the workers in the United States increased from 122 million to 149 million from 1990 to 2008. This saw 27 million numbers of jobs created, however, only 98% of the jobs created between 1990 and 2008 was from non-tradable sectors. According to the author, non-tradable sectors are government and healthcare industries; these sectors are main producers of domestic goods. From this view, it is clear that only 2% on the jobs were from tradable sectors. Export commodities are produced by Tradable sectors, For example, engineering, manufacturing products. More jobs were available in the tradable sector before 1990, the sector created close to 34 million jobs. However, the period between 1990 and 2008 saw a decline in the number of jobs created in the tradable sector, only 600,000 jobs were created. This attributed to a move by most manufacturing activities to developing countries and more so the move of lower value added component. However, the author notes that despite this move of manufacturing activities to emerging markets, high end value-added chain remains in the U.S. Job opportunities are available and rising in tradable sectors such as computer design, finance and engineering. These sectors are high-end valued chain, meaning that they only employ persons with high skills. Based on the study, it is clear job opportunities in the U.S. economy are only more and promising in non-tradable sector. It is also evident from the study that tradable sectors in the U.S. employ highly educated people only. Conversely, non-tradable sectors such as government and health care industry are likely to employ a few people in future. Tradable sectors take only a few people because they require highly educated persons, leaving people in the middle-income bracket out of jobs. Currently, chances are high that non-tradable sectors will not be able to create more job opportunities. Spence (2011) explain that non-tradable sectors have had a decline in job creations since aftermath of economic crisis. The U.S. economy cannot depend on tradable sectors because of two factors noted above; first tradable sectors in the U.S. requires highly educated personnel, secondly, manufacturing activities especially low end value-added chain have been moved to emerging economies. Such sectors could have created jobs for persons in middle-income bracket9. The issue of unemployment in the U.S. and other advance economies need to be addressed. This gives reason for support by this proposal to address issues of globalization and unemployment. From the study above, several factors have been identified as the cause of increasing cases of unemployment in advance economies. Offshoring is one of the factors that have seen a reduction in jobs and increase in unemployment. Secondly, advance economies are affected by emerging markets. This is due to a shift of some manufacturing components especially lower value-added component. Thirdly, increase need of highly educated personnel in high valued sectors. Solutions Solutions to the proposed issue of globalization are based on the study above. Several factors have been identified as the cause of unemployment in advance economies. One factor is the need of highly educated people in high-end value-added chain. Solution to this is the improvement of education sector in the U.S. and advance economies. Highly educated citizens will increase competition in tradable sectors. This will therefore reduce dependence of the economy on imports and increase exports. Additionally, emerging economies are increasing their value added chain from low to high; this means that individuals with low skills will suffer if they do not improve their education system10. Another solution is keeping of manufacturing activities in the country or preventing them from moving to emerging markets. This can be done by development of productive-enhance technology combined with competitive wages. To achieve this, government, business and labor must work together to come up with the right decision. Such strategy has worked in other advanced economies such as German. Access to domestic markets should be stipulated so as to protect jobs from moving out of the country. This strategy is not unique and has been effective in industries like aerospace. Another solution that will increase competition and increase employment and investment is reformation of the U.S. tax structure. Taxes should be lowered so as to improve competition and increase investments. Some multinational companies have had to invest in other countries due to high taxes imposed to them if they invest in the United States11. Reaction Representatives from Global South might argue that prevention of manufacturing activities and other high value-added chains from reaching them will hinder their development. However, they have to note that, both emerging and advance economies must invest on their technology and education system so as to create highly educated workers. Highly skill workers will improve the economy and reduce employment. Globalization and Inequality Globalization has brought a number of changes that have had an effect in every aspect of life. Insecurity issues that are currently common in some parts of the world are due to globalization. The spread of diseases such as AIDs is due to globalization. Growth and use of internet to ease communication and development of efficient transport system are part of globalization. Emerging economies that have witnessed a reduction of poverty is due to integration with other countries, for example India and China. Globalization has allowed developing countries to be among the top exporters of machineries, technologies and other items that were not possible in the past decades. It can be concluded that globalization has improved the living standards of the population in developing countries. Poverty has reduced significantly and as a result a number of people that were poor previously have reduced12. However, some countries are reaping less from globalization and this has led to increase cases of poverty and income inequality. Research shows that income in some countries has been decreasing drastically. Additionally, poverty has been increasing to extend that such countries are in the verge of failing. Measures must be undertaken to address the challenges such countries are facing. This proposal calls for measures that must be taken to address cases of inequality advance economies and developing countries. Milanovic (2011) argues that inequality has been growing for the past few decades between the rich and the poor. The author also noted that recently inequality has risen between countries. Advance economies such as the United States and the United Kingdom have recently experienced income inequality due to the impact of recent financial crisis. Income inequality in advanced economies is attributed to change has not been effected due to recent economic crisis. However, overall income inequality between workers across the world is narrow. This attributed to increasing development in emerging markets such as China and India13. Article by IMF Staff agrees with the study above, it is clear that income inequality has risen for the past few decades. However, per capita income has also increased in both advance economies and developing countries. The article points out that that despite the view that integration is here to cut down inequality, globalization of technology and increases in foreign direct investment have contributed to income inequality. The article states that rising inequality is due to demand of skill labor in both advance economies and emerging markets14. Most analyst and economic experts have different views on inequality. Some believe that income inequality is bad others think that income inequality is good. However on this proposal income inequality is bad in need to be addressed. On this note, equality is good for sustainable economic growth. But, previously some economist believed that inequality is good for economic growth. Previously, the rich were considered because they made savings that they could invest later. However, due to current financial crisis, there is scarcity of human capital more even than scarcity of machines. This calls for a need of education to gain more skills and achieve greater development. Education is imperative for economic growth. Access of education is only possible with sustainable income or even distribution of income. Additionally, studies show that a constant income distribution reduces the gap between skilled and unskilled labor. Based on the above study, it is clear equality is more important for the economy. Ways of reducing inequality should be identified so as to increase economic growth and reduce income disparities existing citizens, men and women and individuals living in different countries15. This gives reason this proposal is important and the need to be considered by the committee. Solution to Globalization and Inequality The study above pointed out that income inequality is as a result of demand of skilled workers. Milanovic (2011) explains clearly that income inequality arises because of technological change calling for highly educated personnel. Based on the argument by the author, it is clear that there is a need to resolve education system to match technological change. That will be the right solution. In addition, it has been noted that in some advance economies such as the U.S. supply of skilled personnel has been fixed. This attributed to the educational system that only takes 12 years and it has remained the same for the past 30 years16. Government intervention can reduce inequality; the government can impose high taxes on skilled personnel. They can also provide social help to some individuals in lower income bracket. This strategy has been applied in some European countries and it has seen a reduction of inequality. For example, Germany applied direct taxes and social transfers and as a result, the Gini coefficient reduced by 9 points. Reactions Some members of civil society might not agree with the solution of the proposal. For example, imposing direct tax on high skill personnel will burden them and make them move out of the country. On other hand, the representatives from the Global South might not agree with this proposal. Members from Global South might argue that recent inequality is only common in advance economies. However, they have to note the emerging markets including their economy are growing first. With a high pace at which they are growing, income inequality is also growing. China is a good example of emerging markets that is experiencing high rate of inequality despite increasing economy. This proposal will reduce equality in developed and developing countries if solutions proposed are agreed to by members of Global North and South. Globalization and Security Issues A security issue is fundamental for any state, organization or individual. Globalization has brought security challenges and opportunities. Globalization might be viewed as a process of integration of markets but, it is also an exchange of ideas and interpenetration of persons17. Cha (2000) explains because of globalization, production, finance, industries and other relevant areas can be spatially arranged. The author notes that confined arrangement and decision making can have global impacts because of globalization. Much talk has been put on globalization of the economy but globalization of security has received less attention. Cha (2000) point out that globalization and security is less considered due to change effected on international security programs, superpower competition and its complexity in analyzing and measuring its effect. Security challenges are driven by globalization, part globalization as it is commonly known is spread of technology spearheaded by exchange of ideas. However, due to the existence of fast and efficient technology, global security has been hampered. This is because anyone can easily access weapons with ease of technology resulting from globalization. Additionally, plans of some groups extremist or terrorists have been ease by globalization of technology. Such groups can meet virtually and plan attacks on specific places. Previously, states were important on agendas of security; however, globalization has made possible for some states to be the main providers of security based on their resources and competence. Additionally, some groups regarded as threat to security have risen because of globalization. For example, terrorist, drug traffickers, ethic insurgence and organized criminals have risen and are competent enough to accomplish their missions. In conclusion, it is evident from the study above that treat by groups such as insurgents, terrorist, drug traffickers, and organization criminals have been promoted by globalization18. In addition, some states have worked effortless to address such insecurity issues. Their effort to face out such groups has proved futile. This article is proposing that both emerging and advance economies should work together in addressing cases of insecurity resulting from globalization. It is evident from the study that one country cannot handle the insecurity despite its capability. Solution Both domestic and international communities should be a concern of security issues. Some issues despite being domestic require attention from international communities. For example, drug trafficking, crime, terrorism and immigration. As pointed above, such crime issues can grow as a result of globalization. International community should come together with use of institutions such as Interpol, Schengen Accord and Trivia19. Scope of security treats has become so wide that one nation cannot deal with it effectively. Cha (2000) point out that prevention of diseases, technology, pollution and transfer of information is not as easy as it was before for one state. However, different countries can work together by contributing resources that can assist in dealing with insecurity issues. Reactions Some members from Global north disagree with some of the solutions stated above. For example, Multilateralism is of effective ways of tackling insecurity issues resulting from globalization. However, members from Global North might say that this issue should be superpowers concern. The proposal requires more than one state be either emerging economy or advance economy to deal with issues of insecurity. Additionally, superpower such as the U.S. has previously dealt with insecurity and treats unilaterally. However, the U.S. plunged into financial deficit despite being unmatched in military20. Currently, European Union and the United States are working together to resolve the issue of Ukraine and Russia. Russia has been accuse of funding Pro-Russian rebels whom have been fighting with Ukrainian forces in Donetsk and Luhansk . The U.S. and EU have imposed sanctions on Russia to force them stop funding Pro-Russian rebels and stop the fight in Donetsk21. Based on this view, it is evident the global security requires more than one states to resolve insecurity issues. Conversely, members from the Global South might argue that issues of security should be left to advance economies because they have enough resources to solve such issues. However, because of globalization human mobility has been increase; therefore issue of security has become transnational. Additionally globalization has led to rise of groups that make use of opportunities of globalization such as information technology and free border movement. Some of these groups have resorted to crime activities such as drug trafficking. In order to bring down such groups, all states including advance and developing countries must work together. References A World Bank Policy Research Report. Globalization, Growth, and Poverty. Washington, DC: Oxford University Press, 2002. Autor H. David, Dorn David and Hanson H. Gordon. “The China Syndrome: Local Labor Market Effects of Import Competition in the United States.” American Economic Review 103, no. 6 (2013): 2121–2168. Bhagwati Jagdish. Why the Critics of Globalization are Mistaken. Berlin: Handelsblatt, 2008. Cha D. Victor. “Globalization and the Study of International Security.” Journal of Peace Research 37, no. 3: (2000): 391-403. Gorg, Holger. Making Globalization a socially sustainable. World Trade Organization. Groshen L. Erica, Hobijn Bart and McConnell M. Margaret. “U.S. Jobs Gained and Lost through Trade: A Net Measure.” Current Issues in Economics and Finance 11, no. 8 (2005): 1-7. IMF Staff. “Globalization: A Brief Overview” International Monetary Fund Issues Brief 3, no. 08 (2008): 1-8. Jonathan Kirshner, “Globalization, American Power, and International Security” Political Science Quarterly 123, no. 3 (2008): 363-389. Kudrytski, Aliaksandr, Krasnolutska Daryna and Rudnitsky Jake. “Ukraine Warns of Europe’s Worst Conflict since World War II.” Bloomberg News, September 1, 2014. Milanovic, Branko. More or Less Income Inequality has Risen over the Past Quarter-Century Instead of Falling as Expected finance and development, September 2011. Spence Michael. Globalization and Unemployment. Foreign affairs, August 2011. http://www.foreignaffairs.com/articles/67874/michael-spence/globalization-and-unemployment. Yusuf, Shahid. Globalization and the Challenge for Developing Countries. World Bank Decrg, June 2001. Read More