Globalization Impacts on Trade and Employment

Abstract

Globalization refers to the coming together of the international markets. It contributes to the forming of trade blocks. Globalization has opened the international market to developing states and countries that can now trade freely. On the other hand, it poses a significant threat to the growth of local industries, particularly in developing nations. Developed states produce goods on a large scale, thus enjoying economies of scale. Their goods are competitive in the global market as they go at low prices compared to products from developing nations. The study shows that globalization facilitates labor mobility, which triggers stiff competition in the job market. It has also led to many people losing jobs due to offshoring and outsourcing. Companies have changed their employment policies due to the availability of cheap labor. Many corporations discourage employees from joining trade unions and hire on a temporary basis. Globalization has led to changes in employment structure as well as the availability of jobs.

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Introduction

Globalization refers to the merging of the global markets. Kemeny and Rigby (2012) define globalization as “the process by which businesses or other organizations develop international influence or start operating on a global scale” (p. 3). Today, globalization impacts all facets of contemporary life. Even though many Americans cannot trace China on a map, they use an assortment of products manufactured from the country. A study conducted in 2010 found that over 37% of the apparel sold in the United States comes from China. Kemeny and Rigby (2012) argue that globalization has significant benefits to the world economies. It helps individual countries regarding trade and employment. It also encourages foreign direct investment, which results in enhanced trade between countries. Besides, globalization facilitates the free flow of cheap labor between countries. Labor mobility contributes to employees losing their jobs. Today, most unskilled employees do not enjoy the security of tenure and are hired on a temporary basis. Employment conditions have changed significantly since the era of globalization (Kemeny & Rigby, 2012). Companies force workers to work more hours and are discouraged from joining trade unions. Despite the benefits of globalization, it is associated with numerous challenges that are witnessed in business and employment.

Impacts on Trade

Globalization dictates how ideas, goods, people, and money move across the globe. It has led to growth in technology and infrastructural development that have facilitated trade among countries. Kemeny and Rigby (2012) argue that globalization has resulted in radical transformations characterized by information circulation, increased production, and the free flow of capital and labor force. Countries are no longer “self-sufficient in the global economy, and they are included in the trade at different levels to sell what they produce and obtain what they require” (Kemeny & Rigby, 2012, p. 9). The conventional economic theory holds that trade leads to economic efficiency. Similarly, one may argue that globalization of production has resulted in the growth of global trade. According to Kovak (2013), globalization has resulted in increased accessibility of the rising and developing market economies. Additionally, it has facilitated global trading activities between developed and developing countries. Before globalization, it was hard for developing countries to access the world market. A majority of the African countries could not sell their products in the European and Asian markets. They only had access to regional markets where they transacted with countries in the same trading blocks. Today, the countries have entered into bilateral and multilateral trade agreements with European and Asian countries.

Kovak (2013) contends, “The value of international trade has grown by a factor of 16 times since the late 1970s” (p. 1968). Globalization has led to tremendous growth in international trade. Additionally, it has made it easy for multinational corporations to increase their influence in international trade. Currently, a significant share of the global trade takes place amid corporations. Kovak (2013) argues that globalization has led to growth in the world’s gross domestic product. Moreover, the global merchandise exports have grown significantly since the Second World War. Many countries have signed trade agreements that have facilitated the sourcing of raw materials and sales of finished products. For instance, the business agreement between the United States and countries such as China has enabled the former to access the global market. Access to raw materials has contributed to decreasing production costs and enhancing competitiveness.

Maurer and Degain (2012) allege that globalization has contributed to the establishment of economic integrations. It has allowed the increased circulation of resources in the global market system. The signing of regional trade agreements has enabled countries to embrace free trade globally. Many countries have championed a gradual increase in business competition as a way to cushion domestic industries from multinational corporations. Today, developing countries continue to join the European Union, Asian-Pacific Economic Cooperation, and Southern Common Market. It signifies the role that globalization has played in bringing countries together to establish a common trading block.

According to Maurer and Degain (2012), globalization has benefited the developed countries more than the developing nations. Free trade between developed and developing countries has posed a significant threat to the growth of local industries, particularly in developing countries. Developed countries manufacture products on a large scale, and they enjoy economies of scale. Thus, they can export the products to developing countries at low costs. Indeed, products from the developed countries wage stiff competition against locally manufactured goods such that it has become hard for developing nations to expand their industries (Maurer & Degain, 2012). There has been imbalanced trade between developed and developing countries. Most developing nations buy a lot of products from the developed countries, but export little. The business deficit between countries like Kenya and the United States is high, thanks to globalization. Kenya exports little to the United States, but import a lot of goods from the country.

Impacts on Employment

According to Potrafke (2013), globalization has resulted in stiff competition for jobs. It has contributed to increases in immigration of cheap labor force and highly skilled professionals who look for well-paying jobs. The free movement of the workforce has led to job insecurity as many employees lose jobs to skilled and cheap workers. Potrafke (2013) claims that globalization has led to a decline in the security of tenure. Furthermore, most employments have become temporary. Globalization has resulted in the rise of non-standard modes of employment like part-time and temporary hiring. Many employers have opted to change their employment policies to cater to the diverse ways of recruitment.

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Globalization has facilitated worker mobility, which has led to an increase in employee turnover. As per Potrafke (2013), increased turnover has altered employee-employer relationships in many sectors. In many cases, workers have demonstrated their unwillingness to enter into dispensable employment agreements. Today, many employees are afraid of losing their jobs, and they work with anxiety. Job insecurity impacts employees with poor educational backgrounds significantly. However, some companies have included training opportunities in their employment policies to enable workers to enhance their skills and reduce turnover. Technological changes have accompanied globalization. The changes have led to companies looking for workers with experience in technology. In spite of many businesses not laying off employees for lack of experience in technology, many workers have opted to quit employment and go back to school to advance their skills. For instance, in the United Arab Emirates, many bankers have decided to quit jobs and go for training. The National Bank of Abu Dhabi has lost a significant number of employees due to changes in technology.

According to Maghadam (2014), globalization has contributed to competition amid companies, which has affected the job security of many workers. Some companies have been forced to scale down on their staff to minimize operations costs. Today, many companies opt to outsource some functions instead of hiring employees. Outsourcing saves a company from the expenses attributed to the benefits accorded to permanent employees.

Ebenstein, Harrison, McMillan, and Phillips (2014) argue, “Globalization affects the number of jobs available in the economy, and thus influences key macroeconomic variables such as the unemployment rate and the employment-to-population ratio” (p. 587). According to Ebenstein et al. (2014), globalization is a major cause of offshoring, which results in job losses. Whenever a company relocates its operations to a foreign country, it results in people losing jobs in the countries of origin. On the other hand, offshoring leads to job creation in the foreign country. Ebenstein et al. (2014) contend that globalization impacts the structure of different jobs. It results in the disappearance of occupations associated with certain economic activities and the emergence of careers linked to others due to changes in competitive advantages. Before globalization, the developing states relied on agriculture as the primary source of employment. The era of globalization saw the introduction of manufacturing companies in the developing nations, which became major sources of employment.

The composition of employment changes as a result of globalization. As per Ebenstein et al. (2014), globalization impacts the blend of skilled and unskilled occupations. In the developed countries, a majority of the unskilled workers have difficulties in finding jobs. Most multinational companies outsource the unskilled tasks to developing nations. According to Ebenstein et al. (2014), globalization has eased the immigration of skilled workers from developing countries to developed nations. Today, qualified employees in developed countries face still competition from their colleagues from developing states.

Potrafke (2013) claims that globalization has resulted in changes in employment conditions due to the accessibility of cheap labor. Today, most unskilled workers are forced to work more hours and do not enjoy the security of tenure. Moreover, many companies have high bargaining power over the employees and discourage them from joining trade unions. According to Maghadam (2014), not all companies have changed their employment conditions to the detriment of the employees. Globalization has forced companies that have invested in direct foreign investment (FDI) meant for export to make their working conditions attractive due to high demand for employees. The companies offer attractive salaries and non-wage benefits.

The number of women in the labor force has increased significantly due to globalization (Maghadam, 2014). As businesses continue to invest in developing nations, they create opportunities for women. For instance, in India, women comprise a remarkable share of the workforce. Maghadam (2014) holds that globalization puts companies in danger of importing toxic labor in search of a cheap labor force. Companies import workers only to find out that they do not qualify for the jobs. Some unqualified workers lie to the employers with the objective of achieving short-term benefits (Potrafke, 2013). They commit themselves to the company to attain their goals, thus becoming noxious to both the organization and labor market. It underscores the reason many countries encourage organizations to hire local employees.

Conclusion

Globalization has numerous impacts on both trade and employment. It promotes the formation of business blocks that benefit both developed and developing nations. Globalization goes hand in hand with infrastructural development and technological growth. In return, the two facilitate the movement of goods from one country to another. Indeed, many developing nations can now access the global market, which was once a reserve of the developed states. Despite the numerous benefits of globalization to trade, it has adversely affected the growth of local industries in developing nations. Products from developed countries pose a significant threat to goods manufactured from developing states.

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There are trade imbalances between developed and developing countries. Studies show that globalization has led to stiff competition in the labor market. It has made it easy for companies to source cheap labor from developing nations. Labor mobility has resulted in many employees losing their jobs to foreign workers. Globalization has contributed to the rise in employee turnover, which has impacted the relationship between employers and employees negatively. Competition amid companies, which emanates from globalization, has forced many organizations to lay off some employees. Globalization encourages offshoring, which leads to many people losing jobs. It contributes to unemployment, particularly in the developed countries. It also impacts the composition of employment in a country. In the developed states, unskilled workers have challenges finding jobs.

References

Ebenstein, A., Harrison, A., McMillan, M., & Phillips, S. (2014). Estimating the impact of trade offshoring on American workers using the current population surveys. The Review of Economics and Statistics, 96(4), 581-595.

Kemeny, T., & Rigby, D. (2012). Trading away what kind of jobs? Globalization, trade and tasks in the US economy. Review of World Economics, 148(1), 1-16.

Kovak, B. (2013). Regional effects of trade reform: What is the correct measure of liberalization? The American Economic Review, 103(5), 1960-1976.

Maghadam, V. (2014). Gender and globalization: Female labor and women’s mobilization. Journal of World-Systems Research, 5(2), 45-62.

Maurer, A., & Degain, C. (2012). Globalization and trade flows: What you see is not what you get! Journal of International Commerce, Economics and Policy, 3(3), 1-27.

Potrafke, N. (2013). Globalization and labor market institutions: International empirical evidence. Journal of Comparative Economics, 41(3), 829-842.

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StudyCorgi. (2021, May 18). Globalization Impacts on Trade and Employment. Retrieved from https://studycorgi.com/globalization-impacts-on-trade-and-employment-research-paper/

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