I knew that someday soon we’d all sail to the moon/On the high tide of technology

The Wall Street Journal discusses the latest labour report by the OECD.

“Millions are benefiting from globalization, but at the same time there’s a feeling something’s wrong with the process,” says OECD Secretary General José Angel Gurría. That is creating political resistance to further moves to free up international trade and investment, he says, particularly in the U.S. and France.

A growing number of economists are expressing concern about the number of losers from globalization. Despite strong economic growth, these economists note, many workers in developed countries are struggling to find well-paid work amid a combination of cheap imports, the relocation of factories and offices to low-wage countries, and changing technology.

“The conventional wisdom was that all boats would be lifted by the rising tide. That was overly optimistic,” says David Audretsch, director of the Max Planck Institute for Economics in Germany.

In fact, as the WSJ points out,

The Employment Outlook concludes that “the expansion of trade is a potentially important source of vulnerability for workers.”

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 income 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 imports from China – is the chief cause of the widening gap between the incomes of low-skilled and high-skilled workers, it argues.

I relate this – with no self-consciousness whatsoever about self-aggrandisement – to my post yesterday about student debt vs. the investment in higher education being worth it. Currently I would say this is moreso than ever. The structure of the modern economy is not going to benefit you if the Global Economy is something that happens to you.

Related to this evening’s posts about peak oil, I take a different long-term view. Learn how to farm, hunt and shoot. I’m a pessimist – at least when it comes to human nature in times of crises…

Forbes also has a look at the report, discussing some of the apparent recommendations for ‘selling’ globalisation, and forestalling a backlash:

“One specific thing: don’t trap people in the jobs they’re in,” said Paul Swaim, one of the authors of the OECD report. “You have to have policies that support high level mobility so that workers can move between different sectors. Some countries have a lot of policies to protect existing jobs, but that’s not a good idea.”

Rather than defend jobs that have become uncompetitive, governments should instead make sure companies give advanced notice and severance pay when redundancies are made. Regulators should also make sure that companies let their relative wages adjust to the changing market conditions.

As for benefits bestowed on individuals who are in between employment, the OECD suggests that should be coupled with a system that actively assists people in their job hunt. “That doesn’t involve retraining a high proportion of people,” said Swaim. “It means connecting them with job openings, and helping them to search effectively for new jobs.”

One idea which the OECD praises, and which is being seriously looked at by the European Union, is that of “flexicurity,” a portmanteau of flexibility and security based on the idea of making hiring and firing easy, while providing benefits and insurance for the unemployed.

Founded in Denmark, the method has pulled unemployment down to 1% there, while giving the country one of the world’s highest levels of employee turnover.

Flexicurity sounds like a very nice concept – not unlike the basic principles of IR in social-welfarist economies. We invite other economies to join us.


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