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AuthorUnited Nations Conference on Trade and Development
TitleGlobalization and the Labour Market
Imprint Geneva, United Nations. 2001
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Descript 24 pages


Paper prepared by the UNCTAD secretariat for the meeting of the ILO Working Party on the Social Dimension of Globalization, Geneva, 12 November 2001. In the two decades following the end of the Second World War full employment, steadily rising real wages and the strengthening of the welfare State were the common features of labour markets in all the leading industrial economies. As a result, the deep insecurity that had marked the conditions of workers in these countries during the inter-war period had, by the end of the 1960s, become a distant memory. All that ended abruptly with the oil price shocks and the collapse of the Bretton Woods system in the early 1970s. In continental Europe, the return of labour market insecurity took the form of sharp and persistent rises in unemployment, while in the United States and the United Kingdom increasing wage inequality between skilled and unskilled workers became the dominant trend. The coincidence of high unemployment levels and growing wage inequality in the North with sharp increases in manufacturing imports from the South has led to concerns over a destructive link running from more open trade relations to the labour market. While recognizing that rapid trade liberalization and surges in imports can cause dislocations in the labour market, this paper argues that in today's globalizing world, the link between trade and employment cannot be properly examined independently of either overall demand conditions or the workings of global financial markets. This is also true for the impact of technological change, also part of the contemporary globalization process associated with the information-communication revolution, which is often suggested as an alternative explanation of recent labour market problems. Under conditions of rapid capital accumulation both trade and technology can reinforce a virtuous circle of economic growth, job creation and productivity increase. If capital accumulation is sluggish and growth weak, increased trade and technical progress can add to unemployment and/or worsen income inequality. Much of the increase in unemployment in industrial countries took place before the surge in manufactured exports from the South. The importance of the macroeconomic context for understanding labour market performance is clearly demonstrated by the recent record of the United States economy, where the unemployment rate fell to levels not seen for many years despite a widening trade deficit with developing countries and the rapid spread of information and communication technologies. Indeed, these technological advances were a major factor in creating an investment boom that underpinned recent United States expansion. On the other hand, the conventional analysis also ignores the dominant role played by finance capital in the current integration process. International capital flows have been growing a good deal faster than trade since the collapse of the Bretton Woods system, with a marked surge to developing countries in the 1990s. At the same time, financial shocks and crises have become a much more frequent occurrence in the international economic system. As a consequence, and particularly in the case of developing countries, financial liberalization and capital movements have been a growing influence on labour market performance. This paper thus adopts an integrated approach to labour market problems in the context of the globalization process. It begins with the links between trade and technology and labour market problems in the North. It rejects any strong direct link in either direction and concludes that a faster pace of accumulation holds the key to reducing unemployment in the industrial countries. The next section asks how liberalization has affected labour markets in developing countries. Although it finds significant differences between countries in the effects of trade liberalization on wages and employment, the impact of financial liberalization appears to have been generally negative for workers throughout the developing world. The final section draws some policy conclusions. [English only]

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