The OECD argues, in its annual Employment Outlook, that earnings inequality is widening in member countries, and that technological change is the primary cause. Globalization, which is partly a result of technological changes like containers, and computers, and partly a result of policies to reduce barriers to trade) is also a (less important) factor.
Marcus Walker reports in today's Wall Street Journal (Offshoring and Cheap Imports May Hurt Workers, OECD Says):
...Globalization has probably contributed to slow wage growth in the U.S. and Europe in recent years, the report finds, and is also partly to blame for rising inequality. Since the mid-1990s, the incomes of the highest-paid have grown at a faster rate than those of the lowest paid in 19 out of 21 countries surveyed, OECD figures show.
But trade isn't the main culprit, the OECD claims: The spread of computer technology -- even harder to reverse than Chinese imports -- is the main thing that is creating a widening gap between the incomes of low-skilled and high-skilled workers, it argues.
For evidence, the OECD points out that inequality is also rising in developing countries such as China, where trade ought to favor low-skilled workers, according to standard economic theory....
Although:
Other economists think such arguments show the limits of standard economic theory: Technology and the growth of trade and offshoring are so intertwined that the distinction may be artificial.
Walker has also posted a short piece to the Journal's economic blog: OECD warns trade may be hurting jobs, wages (Real Time Economics, June 19)
Here's the OECD policy brief that summarizes the trade-employment-wages conclusions: Globalisation, Jobs and Wages (June 2007).
For more information, here's the link to the OECD's web page for this book: OECD Employment Outlook 2007. Here's the OECD press release: Governments must do more to help workers adapte to new global economy, says OECD. The press release suggests we ought to study labor policies in Denmark and Austria:
Globalisation requires mobility to ensure that workers are not trapped in jobs with no future. The report praises the so-called “flexicurity” approach adopted in Austria and Denmark to address this. In Austria, for example, workers have individual savings accounts, instead of traditional severance pay schemes, that move with them as they move jobs. If they lose their job, they can choose to withdraw funds from the account or save the entitlements built up towards a future pension.
Job losers should be compensated through social protection systems which are employment-friendly, the report notes. This can be done by providing adequate benefits hand-in-hand with “activation” policies which increase re-employment opportunities. Experience of Nordic countries and Australia shows that such policies, if well-designed, improve the job prospects of laid-off workers, thereby easing their fears about globalisation.
Here's a post on Denmark's approach to unionization (based on a Progressive Policy Institute - PPI trade post), and how it contributes to addressing issues raised by globalization: Should unions protect the job or the worker? The measures discussed by the OECD and the PPI would be appropriate to address dislocations associated with technological or organizational innovation, as well as trade.
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