Globalisation and Employment

Globalisation has revolutionised the way our economies operate. A huge part of any economy is the employed workforce. We will aim to understand the exact manner in which globalisation affects employment.

• We will define both terms - globalisation and employment.
• We will look at the impact of globalisation on employment by considering factors such as the number of available jobs, the structure and composition of these jobs, earnings, migration, employment relations, and labour legislation.
• We will also critically analyse the negative effects of globalisation, such as wage inequality and volatility of employment.

Globalisation and employment: Definitions

Accordingly, globalisation can mainly be of three varieties - economic, cultural, and technological.

The majority of changes in the employment sector have been brought about by economic and technological globalisation. Free trade, liberalisation of policies, and new technologies have brought about substantial modification of the employment sector. Let us now understand how.

Globalisation and employment: Impact

Let's study the impact of globalisation on employment, using a few key indicators.

Globalisation and labour markets

Economic globalisation affects the number of jobs that are available in different countries and sectors. The economic growth of economies has increased consumerism and eventually, demand for products and services. This has led to an exponential increase in production and job opportunities. This can be seen from the change in the unemployment rate and the employment-to-population ratio of an economy.

At the same time, globalisation has also led to increased competition between countries and organisations, which can oftentimes result in closures, offshoring, and job losses. The most vulnerable sectors that fall in this category are those that are heavily dependent on low-skilled work, such as textiles, clothing, footwear and leather, basic metals and fabricated metal products, and manufacturing industries. Manufacturing is the sector that is the most exposed to offshoring because of competition from low-wage countries.

Sometimes, instead of sectors, the competitive aspect of globalisation affects people of a particular category.

Globalisation and employment: structure of jobs

As a result of globalisation, jobs linked to certain economic activities may tend to diminish while jobs linked to certain other activities are created. This is due to changing competitive advantages and patterns of specialisation (Duffield, 1999). At the same time, jobs specific to a particular activity may increase in a country while a different country sees a decline in jobs in the same sector. This structure will depend on multiple factors like technological advancement and the demand for particular sets of goods and services in different parts of the world.

Globalisation and employment: composition of jobs

Economic and technological globalisation hugely affects the composition of jobs in any given area. For example, as developing countries try to make their economies more efficient and technologically advanced, their dependence on unskilled labour may reduce drastically. At the same time, developed countries have high levels of consumerism and thus high demand. To make profits, organisations in such countries may try to cut costs to increase profits. They might seek to do so by employing cheap labour available elsewhere, increasing their need for unskilled labour.

The increasing competition and access to better facilities have made the workforce in developing countries better qualified and increasingly engaging in more sophisticated, service-oriented activities. They might also be hired by bigger employers in developed countries, reducing the number of jobs available for skilled workers in their own developed countries.

Globalisation and employment: impact on job earnings

Economic globalisation may affect job earnings in the following major ways:

• It allows trade liberalisation, which in turn encourages entrepreneurship and allows business owners to earn more.

• The increasing overall efficiency of the economy allows companies and employers to pay their workers more.

• Encouraging the movement of products and production factors between different economies reduces the price differences between countries, which in turn allows the gap between wages in different countries to be reduced.

However, despite the steady increase in job earnings, wage inequality seems to be increasing, especially in developing countries.

Globalisation and employment: inequality of wages

The world today has a wide disparity in wages. An increase in international trade has the potential to make everyone better off, but if those who gain do not actually compensate those who lose, the overall effect of welfare is reduced (Collier, 2017).

Wage inequality in the global context comes in various forms. It can be seen in terms of:

Wages for the same skill set in developed and developing nations:

One study finds that the median wage for jobs in advanced countries is more than double the wage level for jobs with similar skill levels in the most well-off developing countries, and a staggering five times the level in low-income countries.

The difference between the earnings of skilled and unskilled labour within a country:

In a survey, 21 out of 28 developing countries experienced increased income inequality from the early 1990s to the mid-2000s (International Labour Organisation). This goes to show that, while liberalisation of trade and foreign investment has increased the returns to skilled workers, the returns to unskilled labour are either the same or have decreased further.

Rate of reduction in wage gaps in different countries:

From 1999 to 2009 (the year of the worst global recession since the 1930s), average real wages rose by about 0.5 percent per year in developed countries, compared to about 1.5 percent in Africa and Latin America, and almost 8 percent in developing parts of Asia.

Fig. 1 - Despite the steady increase in job earnings, wage inequality seems to be increasing, especially in developing countries.

Globalisation and employment: impact on migration

Globalisation has caused the reorganisation of labour markets, which ultimately has a substantial impact on migration.

A great and increasing number of people are moving between countries and continents. Walt Whitman Rostow (1960), in his five stages of growth, theorised that once we reach the stage of mass consumption, young people will behave in a way where mass consumption is considered normal and increasingly look for better opportunities. Thus, it is not just the increased number of opportunities, but the quality of opportunities that attract young people to leave their places of origin and move to different areas in search of a better life (Leonard, 2019). Globalisation has also introduced new forms of migration such as retirement migration, where people travel to less expensive, quieter places post-retirement.

This can sometimes also lead to brain drain, which refers to the loss of human capital and/or outflow of skilled labour in countries and cities that occurs when people leave in search of other jobs.

Globalisation and employment: impact on employment relations

Globalisation has had a huge impact on such relations by bringing about a change in how we perceive employment and the interaction of workers with different agents of society.

Let us understand the effect of globalisation on employment relations.

Globalisation and employment: formal methods of recruitment and training

Recruitment before globalisation was largely generalised and had a haphazard approach. However, globalisation has streamlined the process of recruitment and training.

• Better technology allows organisations to modernise and standardise their hiring and recruitment. Potential employees are recruited using artificial intelligence and software instead of actual people, or with minimal supervision from recruiting personnel. This allows less subjectivity and human errors.

• Cultural globalisation has brought about more tolerance and acceptance of other cultures and people. Large multinational corporations cannot get away with predominantly hiring from a particular section of society. Equality and diversity have become an integral part of hiring and recruitment.

• Training and development is a highly specialised field in the employment and human resources sector. The exchange of information brought about by better communication channels and technology allows employers to provide their employees with up-to-date training and the best skills to deliver better.

Globalisation and employment: workplace identity and management

Globalisation has led to immense competition among companies. In order to succeed, the workplace identity of an individual is emphasised and utilised, because a healthy, happy individual is likely to be more productive. In order to achieve this, the management function within companies and organisations has seen a major overhaul.

Personnel at higher levels are conscious of their role in the personality development of employees and workers. Workplace discrimination is being taken more seriously and employees are not being taken for granted. A lot of employers in developing countries have now realised that, without the development of human resources, they are unlikely to compete with counterparts in developed nations (Chishti, 2002).

Globalisation and employment: labour legislation

Globalisation and the increasing movement of capital and labour across international borders have created a situation where labour laws are more international. Along with regional economic agreements and regional integration schemes, the Conventions of the International Labour Organisation (ILO) have now become equally important as national labour laws.

Processes of globalisation have paved the way for the shifting of focus from purely economic considerations to laying the groundwork for inclusive, democratic, and developmental transnational labour laws and regional labour standards. In addition to this, it has also put pressure on nations to revisit their immigration laws, especially in light of the manifold increase of migrant workers, who continue to be excluded from any sort of protection as workers.