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A co publication by the International Labour OfficeA co‐publication by the International Labour Officeand the Secretariat of the World Trade Organization

Making Globalization gSocially SustainableAn ILO – WTO co‐publication

Edited by Marc Bacchetta (WTO) and Marion Jansen (ILO)


Social dimensions of globalization: bli tipublic perceptions

Ab h lf f A i d E hi k h• About half of Americans and Europeans think that “freer trade” results in more job loss than job creation

• 62% of respondents say that job security has declined (US survey)

• In 43 European countries surveyed, the majority of people believed that globalization is an opportunity for economic growth but increases social inequalities g q


Motivations

• Strengthen the evidence base of the d b l b li i ddebate on globalization and ...... Employment

... Uncertainty

... Inequality

• Provide policy guidance


The book is in three sections

Section 1: Globalization and employment

Section 2: Globalization and uncertainty

Section 3: Ensuring a sustainable distribution gof the gains from globalization

A co publication by the International Labour OfficeA co publication by the International Labour OfficeA co‐publication by the International Labour Officeand the Secretariat of the World Trade OrganizationA co‐publication by the International Labour Officeand the Secretariat of the World Trade Organization

Globalization and employmentp yChapter 1: Globalization, Offshoring and Jobs

Holger Görg (Kiel University)

Chapter 2: Trade, Employment Structure and Structural TransformationMargaret McMillan (IFPRI)Dani Rodrik (Harvard University)

Ch t 3 Th C i i P li R ti d J bChapter 3: The Crisis, Policy Reactions and JobsDavid Bell (University of Stirling) David G. Blanchflower (Dartmouth College)


Globalization, Offshoring and Jobs (Görg)How do trade opening and offshoring affect employment in developed economies and is there a role for governments in helping to maximize the gains g p g gfrom globalization?

• Higher job turnover in the short run g j

• No indication of long run effect on aggregate unemployment but low‐skill workers may suffer

• Structural change towards services linked to globalization

• Challenge is identification and compensation ofChallenge is identification and compensation of losers


Trade, Employment Structure and Structural transformation (McMillan & Rodrik)transformation (McMillan & Rodrik)What are the effects of globalization on the structure of employment and growth in developing economies? p y g p g


The Crisis, Policy Reactions and Jobs (Bell and Blanchflower)(Bell and Blanchflower)

How did the Great Recession affect employment and how did governments react? g

• During the recession, the labour market performance has been weaker in developed than in developing countries.

• The young, the poorly educated and ethnic minorities have suffered disproportionately in terms of unemployment in developed countries. p

• Public sector intervention has often had an attenuating effect on employment impacts.

• If recovery is jobless, demands for protectionism may grow , especially in countries where inequalities are widening.


Globalization and Uncertaintyy

Chapter 4: Globalization and Economic VolatilityJohn Haltiwanger (University of Maryland)John Haltiwanger (University of Maryland)

Chapter 5: Actual and Perceived Effects of Offshoring on Economic Insecurity: The Role of LaborM k R iMarket RegimesWilliam Millberg (New School for Social Research, New York)

Deborah Winkler (New School for Social Research, New York)

Chapter 6: Social Protection in Labour Markets Exposed to External ShocksDevashish Mitra (Syracuse University)Devashish Mitra (Syracuse University)

Priya Ranjan (University of California – Irvine)


Globalization and Economic Volatility (Haltiwanger)(Haltiwanger)

How does globalization affect the process of resources reallocation?reallocation? • In open economies, less‐productive firms are more likely

to close down and more‐productive firms to thrive. This t ib t iti l t d ti it th dcontributes positively to productivity growth and

possibly to workers’ earnings and employment.

• However during periods of economic crisis or in• However, during periods of economic crisis or in distorted economic environments, “de‐coupling” can take place: i.e. closure of less‐productive businesses not accompanied by creation and expansion of moreaccompanied by creation and expansion of more‐productive businesses.


Actual and Perceived Effects of Offshoring on Economic Insecurity: The Role of Labor Market Regimes

(Millberg & Winkler)

Is globalization increasing labour‐market related uncertainty or only the perception of uncertainty?

• In many industrialized countries, the increase in the labour share of income of the 1970s began to level off in the 1980s and turned into a downward trend at the end of the 1990s.

• Offshoring contributed to this evolution. Its effect on the labour share depends crucially on labour market institutions.

• Offshoring seems to have raised the labour share in countries with strong labour market support.


Social Protection in Labour Markets Exposed to External Shocks(Mitra & Ranjan)(Mitra & Ranjan)

Can social protection help ensure that no one loses from trade opening? If yes, how should it be d i d?designed?

• Social protection can lead to increased support for more open trade. But a focus on trade‐displacedmore open trade. But a focus on trade displaced workers alone may not be enough. Equity concerns may need to be taken into account.

l h h l• In low‐income countries in which social protection systems with wide coverage are not yet in place, public works programmes can be very successful in p p g ymitigating the consequences of economic crises.


Ensuring a Sustainable Distribution of the Gains from Globalizationfrom Globalization

Chapter 7: Globalization and Within Country Income InequalityInequalityNina Pavcnik (Dartmouth College)

Chapter 8: Redistribution Policies in a Globalized WorldChapter 8: Redistribution Policies in a Globalized WorldCarles Boix (Princeton University)

Chapter 9: Education Policies to Make Globalization pMore InclusiveLudger Woessmann (University of Munich)


Globalization and Within Country Income Inequality(Pavcnik)(Pavcnik)

Is globalization responsible for the growing inequality within countries?within countries?• Globalization can contribute to growing wage inequality

between skilled and unskilled workers because:Off h i ib di l kill bi d h l i l h– Offshoring can contribute directly to skills‐biased technological change in developing countries.

– Trade can contribute to wage inequality by raising wages in exporting firmsfirms.

• The effect of international trade on wage inequality depends on the specific country, the nature of trade liberalization and/or the type of trade that countries engage inand/or the type of trade that countries engage in.


Redistribution Policies in a Globalized World (Boix)Does globalization curtail the capacity of national governments to pursue redistribution policies?

Th b d iti l ti b t th i f th bli• The observed positive correlation between the size of the public sector and the level of trade openness suggests that states can and do develop fiscal policies to compensate those made worse off by globalizationoff by globalization.

• This correlation may decline because globalization increases the mobility of labour and capital, but:

Policies of social compensation by reducing social conflict may– Policies of social compensation, by reducing social conflict, may reduce incentives of capital to move;

– Dislocation of capital may be avoided by channelling increased public spending into infrastructure, education and training or the p p g , gquality of public institutions.


Education Policies to Make Globalization More Inclusive (Woessmann)Inclusive (Woessmann)

What is the role of education and skills policies in spreading the benefits of globalization and making itspreading the benefits of globalization and making it more inclusive?• Education and skill policies determine whether people are able

to share in the gains from globalizationto share in the gains from globalization.

• The quality of early childhood education is particularly relevant in this context because it fosters learning at subsequent stages in lifein life.

• To increase workers’ capacity to adapt to changing environments, Woessmann argues in favour of putting a stronger emphasis on "generalizable" skills in programmes ofstronger emphasis on generalizable skills in programmes of vocational and technical education, where they exist.


ConclusionsIn order to capture globalization's full potential to stimulate productivity and growth, three challenges need to be overcome :need to be overcome :

1. Structure and levels of employment emanating from globalization can be more or less favourablefor the labor force;

2. Openness provides a buffer against domestic shocks but increases labour markets’ vulnerabilityshocks but increases labour markets vulnerability to external shocks;

3. Gains from globalization are not distributed equally: some firms and workers may lose in the short and possibly medium‐run.


ConclusionsGovernments have an important role to play in making

globalization socially sustainable:

1. Investment in public goods (e.g. infrastructure, legal system);

2. Strengthen the functioning of markets relevant for transition processes (e.g. financial markets);

3. Social protection to facilitate transition processes and assist those suffering from increased openness;

4. Education and skill development policies.


Making Globalization gSocially Sustainable

Available at:http://www.ilo.org and http://www.wto.org

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