Publication Date

7-31-2008

Abstract

[Excerpt] Today's global economy, or what many call globalization, has a growing impact on the economic futures of American companies, workers, and families. Increasing integration with the world economy makes the U.S. and other economies more productive. For most Americans, this has translated into absolute increases in living standards and real disposable incomes. However, while the U.S. economy as a whole benefits from globalization, it is not always a win-win situation for all Americans. Rising trade with low-wage developing countries not only increases concerns of job loss, but it also leads U.S. workers to fear that employers will lower their wages and benefits in order to compete. Globalization facilitated by the information technology revolution expands international trade in a wider range of services, but also subjects an increasing number of U.S. white collar jobs to international competition. Also, globalization may benefit some groups more than others, leading some to wonder whether the global economy is structured to help the few or the many.

The current wave of globalization is supported by three broad trends. The first is technology, which has sharply reduced the cost of communication and transportation that previously divided markets. The second is a dramatic increase in the world supply of labor engaged in international trade. The third is government policies that have reduced barriers to trade and investment. Some recent research examines whether these trends are creating new vulnerabilities for workers.

Some of the vulnerabilities for workers are underlined by changing employment patterns caused by increased foreign competition, a declining wage share of national income, and rising earnings inequality. These trends, in turn, have become a source of economic insecurity for many Americans and may be weakening public support for U.S. engagement with the world economy.

To bolster public support for an open world economy, the conventional wisdom is that the legitimate concerns of those who are losing in the contemporary economic environment need to be addressed. To what extent the losers should be compensated and how is a matter of considerable congressional and public debate. Because the relationship between globalization and worker insecurity is complicated and uncertain, a number of different approaches may be considered if the goal is to bolster public support for U.S. trade policies, globalization, and an open world economy. Policies involving adjustment assistance, education, tax, and trade are most commonly proposed.

There appears to be a range of views on the merits of each of these policy approaches and the extent to which they can be designed and implemented in a way that would reduce worker insecurity without undermining the benefits of globalization. In the view of many economists, policies that inhibit the dynamism of labor and capital markets or erect barriers to international trade and investment would not be helpful because technology and trade are critical sources of overall economic growth and increases in the U.S. living standard. This report will be updated should events warrant.

Comments

Ahearn, R. J. (2008). Globalization, worker insecurity, and policy approaches (RL34091). Washington, DC: Congressional Research Service. http://digitalcommons.ilr.cornell.edu/key_workplace/536/

Share

COinS