Section 9: The Labor Market

Section 9: The Labor Market

“Does a Global Market Exist? … “Outsourcing” and the Global Labor Market … Making Connections”
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  • 9. The Labor Market > Does a Global Market Exist? > Lecture
  • 9. The Labor Market >
  • 9. The Labor Market > Making Connections > Interview Video

9. The Labor Market > Does a Global Market Exist? > Lecture

  • The concept of a global labor market is one of the fundamental and most discussed aspects of globalization.
  • There is worldwide concern about the present and future unemployment of large numbers of workers because of the social unrest and political instability that can result from labor markets that are unable to absorb those who want and need jobs.
  • There is a widespread sense that global employment in an economic sector such as manufacturing is a zero-sum game, that more jobs in one country must mean fewer jobs in another and that unemployment in the factory or economic sector that has lost those jobs will persist for an indefinite period of time.
  • The countervailing and more optimistic claim is that the loss of relatively low-skilled jobs to outsourcing will be more than made up for when the displaced workers are trained to fill more highly-skilled and better paying jobs.
  • There are economists today who no longer believe that the retraining of workers will be able to keep up with the rate at which automation will create unemployment on a global scale.
  • We have become accustomed to the idea that the many millions of Chinese workers, whose labor has created the greatest export boom in history, will always be employed.
  • In a genuinely integrated world economy, workers would migrate freely to new places of employment and settle there.
  • More than 10 million Mexicans have sought and found work in the United States.
  • Over the past 50 years, millions of so-called guest workers have found work in Western Europe.
  • As of 1996, there were almost 10 million foreign workers in Middle Eastern countries, including 60% of the workforce in Saudi Arabia.
  • About 300,000 Philippine citizens have migrated to ships around the world to work as seafarers.
  • These foreign workers send home cash remittances on an economically significant scale.
  • On a global scale only a very small percentage of workers leave their home countries to work overseas.
  • Even the liberal work rules of the European Union have not motivated more than a few percent of Europeans to work in other countries.
  • The large wage differentials that persist between developing and developed societies are more evidence that the global labor market is not fully integrated, since workers in different parts of the world are not being paid the same wages for the same work.
  • At the same time the decision to outsource is motivated by the substantial difference in wages paid to workers doing the same jobs in two different geographical locations.
  • Companies in the United States can often save money by outsourcing work to companies in India.
  • Intercontinental wage differentials indicate less integration, while geographically separated workers doing the same jobs indicate more integration.
  • In these labor markets, top athletes, entertainers, and academics are granted both maximum mobility and substantial financial rewards.
  • One might say that these global celebrities belong to a working elite that symbolizes, for its global audience, an integrated and meritocratic workforce that is unlikely to appear anywhere else in the global labor market.
  • These workers may face discrimination and lack of access to important services like bank accounts.
  • The original guest workers, who were recruited to work in German factories during the 1960s, came from Mediterranean countries, Italy, Spain Greece, Turkey, Morocco, Portugal, Tunisia, and Yugoslavia.
  • While German officials believed that these workers would eventually return to their countries of origin, it turned out that they were mistaken.
  • People from many African countries, desperately seeking entry into the European labor market, over land and in small boats, now constitute nothing less than a humanitarian crisis, as hundreds of people have drowned trying to reach the Mediterranean coastlines of Spain, Italy, and Greece.
  • In summary, obstacles to immigration and workplace discrimination in developed countries are another factor that prevents a fuller integration of the global labor market.
  • Global labor migration also provides crucial funds for the undeveloped countries migratory workers leave behind as they seek employment abroad. Foreign workers take these so-called remittances out of their salaries and send this money back to their countries of origin.
  • According to the World Bank, foreign workers sent $401 billion to their families in developing countries in 2012.
  • On a macro scale, we know that the global labor market has been unified over the past several decades by China’s decision to go down the capitalist road and by the collapse of the Soviet empire.
  • The entry of huge numbers of low-skilled workers into the global labor market has kept the wages of their counterparts in the developed world from rising as much as they otherwise would have done.
  • The McKinsey Global Institute predicts that China and the advanced economies are going to lack tens of millions of educated workers they will need.

9. The Labor Market > “Outsourcing” and the Global Labor Market > Lecture

  • It takes 3/4 of a million workers to produce iPads and iPhones, but only 1 in 16 of them is employed by Apple in the United States.
  • Today the new and more ominous story, certainly for a professor, is about the possibility that many high skill jobs will become vulnerable to being outsourced to lower cost foreigners with comparable but less expensive skills.
  • At stake are entire sectors of the global employment market that have sustained millions of highly educated and highly trained professionals, such as academics and doctors and lawyers.
  • Searching through large numbers of legal briefs and precedents or examining documents and draft contracts are some examples of currently outsourced legal work.
  • Earlier in this section, we noted that both outsourcing and automation can replace human workers.
  • Medical tourism is a thriving example of the outsourcing of professional work.
  • These scenarios involve people seeking medical or dental treatment or perhaps medically unorthodox or disreputable procedures that cannot be obtained at home.
  • Professor I. Glen Cohen of Harvard Law School has described three kinds of medical tourism.
  • The first involves medical services that are illegal both in the patient’s home country and in the country that offers the service.
  • The second involves medical services that are illegal in the patient’s home country but legal in the country where the service is offered.
  • The third scenario involves a medical procedure that is legal in both countries.
  • Regarding the third scenario, it is useful once again to look at a comparison between professional services offered in the United States and India.
  • Medical costs in the United States are the highest in the world.
  • For that reason, some American insurance companies and corporations advise patients to seek much less expensive treatments, including heart surgeries in hospitals in India and Thailand.
  • Many countries have embraced this entrepreneurial approach to joining for-profit global medical network.
  • After Thailand’s currency crisis in 1997, the government promoted Thai medical facilities as desirable venues for plastic surgeries and eventually sex change operation that required less of the psychological counseling that is often mandatory elsewhere.
  • During the 1980s, Cuba initiated programs to attract foreign patients from India, Latin America, and Europe for eye surgeries, heart procedures, and cosmetic procedures.
  • The expanding and proliferating market for services offered by medical tourism is a genuine globalization phenomena.
  • Professor Manfred Steger’s observation that globalization includes an insatiable appetite for technology fits the phenomenon of medical tourism.
  • Medical tourism can also take the form of access to drugs that are restricted in some countries and freely available in others.
  • While American doctors are providing more and more testosterone therapy to aging men, for better or for worse, the American Medical Association does not endorse the use of human growth hormone for anti-aging purposes.
  • It is not surprising that the global medical labor market includes many doctors who will perform procedures that other and perhaps more ethical doctors will not.

9. The Labor Market > Making Connections > Interview Video

  • How could automated production destabilize the global market? If you have a situation where machines are doing a lot of the production that large numbers of workers have done, then those workers are going to be thrown out of work.
  • The question is whether they are going to be unemployed for the foreseeable future or whether they can be retrained to fill other jobs, possibly higher level jobs, better paid jobs, that are going to replace the ones that have been displaced by technological inventions that allow for very few people to supervise the production of lots and lots of product by machines.
  • Why might a globally integrated market be beneficial? A globally integrated market, ideally, would be one which is uniform, literally across the planet, so that wages for any specific job would be identical, whether it was country A or country B or country C. This is potentially beneficial in that there would be an equality that usually does not prevail.
  • In other words, the lowest-paid people for doing a particular kind of work would see their wages elevated to the levels enjoyed by other workers in other countries.
  • Why did the leaders of Britain, France, and Germany all announce the failure of multiculturalism in 2010? The leaders of Germany, France, and Britain announced the failure of multiculturalism in 2010.
  • What happened was that, in the summer of 2010, a certain politician and bank official published a book that was very anti-immigrant in its ideology and its tone.
  • I’m going to curry favor in the electorate by, in effect, saying on the one hand, well, the author of this book, Mr. Sarrazin, has expressed this in too extreme a manner.
  • These are not borderline places where there’s an economic emergency that is going to really inflame feelings against immigrants, as is currently the case in Greece.
  • Their political unease with the unease about the cultural integration, or failure to culturally integrate large numbers of Muslims in particular into the societies, that they decided to align themselves with the conservative position that multiculturalism had been tried and it had failed.
  • How does the perceived failure of multiculturalism affect global labor markets? 50 years ago, Germany invited many foreign workers from the Mediterranean area to come to Germany to help build the so-called economic miracle of the 1960s.
  • They assumed that these people were going to work and then go back where they came from.
  • The less-wealthy populations are going to be supplying immigrant labor at the invitation of the Germans in the 1960s.
  • 1970s, they decide to turn off the tap, and they are not going to be taking any more immigrant workers.
  • So the sense that the integration process is going well or that it is going badly is going to affect the views of politicians and policymakers regarding whether or not to allow additional foreign labor to come into your society.
  • This is already happening in the case of, say, legal work.
  • There are certain kinds of legal work that is either repetitive or involves a very systematic searching of documents, for example, which can be outsourced.
  • You can give this kind of work to much lower-paid legally trained people in India, shall we say? Some of this can also be given to computers.
  • So in that sense, there’s two kinds of outsourcing of relatively highly-skilled work.
  • You can give it to a machine that has the software to handle it, or you could give it to lower-paid people on the other side of the world who have the skill set and maybe a quarter or a fifth of the salary for doing the same kind of work the junior lawyers would be doing in the United States.
  • Exploited groups of workers are certainly a social justice issue.
  • So legal and practical protections for vulnerable, often low-paid workers, is a social justice issue that is tightly bound to the whole question of the global labor markets.
  • A second example would be the ship breakers, who are very poor and vulnerable people paid very little to dismantle ships on the beaches of India, Bangladesh, and a few other countries.
  • So our study of global transportation systems is also going to bring us into contact with important issues with regard to the global labor market.

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