Assignment 4.2/International Business
10/20/13
National American University Heather Morris

The impact of globalization on labor markets has re-emerged as an important policy issue, reflecting the broader public debate about the interrelated concerns of downward pressure on wages, increased job insecurity, and jobs moving from OECD countries to developing countries with lower wages.
Two relatively recent phenomena are at play here. One is the accelerating participation in world trade of many developing and transition countries, particularly the large, vastly populated economies of China and India. These countries’ increased trade and foreign direct investment have, according to some estimates, contributed to a fourfold rise in the effective global labor force over the past two decades.
The second phenomenon is that the nature of globalization is changing. Technological advances, and particularly sharp reductions in communication and coordination costs, have allowed the emergence of global supply chains that are increasingly fragmented geographically. To feed these supply chains, international trade is
Increasingly in intermediate inputs rather than in final goods and services or commodities.
Moreover, often these intermediate inputs are business services that were previously nontradable but are now, with technological advances, tradable. This type of international trade, whether in services or other intermediate inputs, is referred to as offshoring. Here too China and India have been key players.
What are the labor market implications of the current wave of globalization for globalized countries? There has been an overall improvement in employment and unemployment rates and continued real wage growth during the past decade, albeit in the context of rising earnings inequality and a reduced share of labor income.
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