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Globalization's Impact on the Labor Market

Globalization's Impact on the Labor Market

November 11, 2008

by Rusty Weston | Monster Contributing Writer

If globalization were put to a popular vote in the United States, it would lose, according to Jeffrey Immelt, CEO of General Electric, one of the world’s largest multinational employers.

Opponents of globalization contend that an economic race to the bottom is under way as workers in First World economies will be forced to cut their standard of living to compete with workers in Third World economies. Opponents also claim that only the wealthy benefit from globalization and the poor aren’t keeping pace.

On the other side of the issue, Columbia University Professor Jagdish Bhagwati argues in his book In Defense of Globalization that globalization is an engine of social change, helping to eradicate poverty, reduce child labor and increase literacy.

Yet unless you’re a skilled economist, it’s not always clear how globalization generates more rather than fewer job opportunities for skilled workers worldwide. So the question is: Have workers been seriously damaged as a result of globalization?

“I can’t find any evidence that supports the race-to-the-bottom view,” says Robert Flanagan, a Stanford economics professor and author of Globalization and Labor Conditions: Working Conditions and Worker Rights in a Global Economy. “Free trade does tend to improve conditions for workers and consumers around the world.” As an example, he cites greater investment in Third World and emerging economies that have led to economic development, job creation and improved living standards.

Where Do We Stand?

Even as globalization’s effects are debated, plenty of data suggest the pie is getting larger for nearly everyone:

The International Monetary Fund, which lends money to governments with struggling economies, claims that more than 200 million people have been lifted out of poverty in India and China since the 1990s in the wake of deregulation that has fueled high GDP growth in those countries.

Despite the recent addition of tens of millions of globally connected workers in Asia, the US unemployment rate hovers at about 4.6 percent (only 2.3 percent for college graduates), which, in a major economy, is considered close to full employment.

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