The labor market has become extremely globalized these days. Globalization is contributing to increased integration of labor markets and closing of the wage gap between workers in advanced and developing economies.
There are several reasons for that, including:
- International migration of population
- Rapid growth of global trade and foreign direct investment flow
- Rapid technological changes
- Development of global infrastructure
We are very far from a global labor market, as evidenced by a wide disparity in wages. According to numerous studies, the median wage for jobs in developed countries is two and a half times the wage level for jobs with similar skill levels in the most advanced developing countries and five times the level in low-income countries.
That gap, however, is narrowing in part due to globalization. And each of the channels for globalization contributes to the wage convergence.
Increased migration
The volume of emigrants from developing countries is just two-percent of their population, so emigration plays little role in raising wages by limiting the growth in labor supply in developing countries. Moreover, most studies show that immigration has had only modest long-term effects on wages in advanced countries.
Rapid growth of global trade
Trade can promote wage convergence even when workers do not move. Developing countries with abundant labor available export goods that are labor-intensive to produce, so trade causes their wages to rise relative to rich countries, which have less labor and plenty of capital.
Foreign direct investment
Foreign direct investment in developing countries can raise the productivity of workers, and thus, their wages, by transferring management skills, capital, and technology. In the process, jobs are sometimes outsourced from advanced countries as well.
Technological changes
Skill-biased technological change is a major driver in reducing the demand for unskilled workers. At the same time, the transfer of all types of technology through FDI, international trade, and migration from advanced to developing countries provides an enormously important opportunity for raising productivity — and wages — in the latter. Moreover, increased competition from low-wage countries tends to spur labor-saving technology in advanced countries.
However, the coin has two sides. The globalization of the labor market has downsides as well. The rapid technological change in the 21st century has led to greater competition and higher unemployment rates. The key challenge for individuals and policymakers is to respond to this issue properly.
WorkQuest will be instrumental in solving the problem of unemployment. It simplifies the search for reliable employees and honest employers using the interface of a mobile phone application. Blockchain technology will ensure the truthfulness of reviews and comments of all parties.
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