Janine Berg ILO-Brasilia Understanding and Responding to the Labour Impact of Globalization RIAL...
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Transcript of Janine Berg ILO-Brasilia Understanding and Responding to the Labour Impact of Globalization RIAL...
Janine BergILO-Brasilia
Understanding and Responding to the Labour Impact of Globalization
RIAL Workshop “Labour Dimension of Globalization”Santo Domingo, Dominican Republic
27 July, 2010
Guiding Questions for the Panel
1. What has been the impact of globalization on employment and
wages in the region?
2. What are the key characteristics of a country that determine or
can anticipate these impacts?
3. How can labour market institutions help in meeting the
challenges of globalization?
How is globalization manifested?
Foreign Investment
MigrationTradeEach one is affected by both internal and external factors and each
has an impact on the other.
World trade opening (mean tarrifs %)
1980 1985 1990 1995 2000 2005 Change (p.p.) 1980-2005
East Asia and the Pacific
31.9 24.3 25.2 24.8 13.2 9.0 -22.8
East Europe and Central Asia
44.0 26.0 18.2 18.2 8.8 6.2 -37.8
Latin Am. & the Caribbean
37.9 35.6 23.6 23.6 10.6 8.0 -30.0
Middle East & N. Africa
25.1 20.5 22.9 22.9 22.4 11.7 -13.4
South Asia 63.0 62.9 57.9 57.9 25.1 14.9 -48.2
Sub-Saharan Africa
28.3 28.7 25.2 25.2 14.1 12.7 -15.6
Total, Developing Countries
38.4 33.0 28.8 28.8 15.7 10.4 -28.0
Developing Countries
13.7 9.5 10.5 10.5 6.7 5.4 -8.3
Source: McMillan & Verduzco, 2009.
50.0
80.0
110.0
140.0
170.0
200.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 a/
Exportaciones Importaciones
Latin America: Index of Volume Traded, 2001 – 2009
(Index 2000=100)
Source: ILO, based on information from IMF, April 2010 and ECLAC. Information on Latin America based on 18 countriesNote: a/ ECLAC forecast.
Trade and employment: What does the theory tell us?
Neoclassical theory tells us that free trade will lead to a shift in
production towards the more abundant factor.
For developing countries, this factor is low-skilled labour (or natural
resources).
The demand for the factor increases, and as a result, its price.
In the case of low-skilled workers, the increase in demand will lead
to a reduction in the wage gap between high-skilled and low-skilled
workers.
But theory isn’t a good guide…
“There is no area of economics where
there is a greater gap between
orthodox theory and actual problems
than in the theory of international
trade.”
-- Joan Robinson, 1971
Why?
Because it depends on…
The structure of the world economy (trade in tasks, trade
agreements, multinational policies, commodity prices)
Conditions specific to the country (the exchange rate,
economic conditions, the cost of credit, the availability and
quality of infrastructure, tax laws, labour market institutions,
access to other markets)
What does the data tell us? Evolution of industrial employment
Employment (1,000 workers)
1980 1985 1990 1995 2000 2005
East Asia & the Pacific
26,834 32,635 59,527 64,747 55,254 69,356
China 24,390 29,743 53,040 58,255 44,927 59,353
Eastern Europe & Central Asia
6,067 5,678 11,125 24,205 21,006 17,646
Latin America and the Caribbean
9,605 10,374 8,297 7,525 8,598 9,438
Middle East & North Africa
2,363 2,526 2,749 3,273 2,250 2,125
South Asia 7,866 7,671 9,236 10,986 8,928 8,180
Sub-Saharan Africa 2,653 2,427 2,539 2,915 1,764 1,531
Total, Developing Countries
55,388 61,310 93,472 113,651 97,799 108,275
Developed Countries
61,214 56,420 59,212 60,909 62,616 53,975
Source: McMillan & Verduzco, 2009.
And within Latin America? Some stylized facts
• In Mexico, Central America and the Caribbean, trade opening has increased output and employment of labour-intensive goods, but traditional manufacturing that had existed prior to liberalization suffered. Although there has been an increase in manufacturing jobs, the new jobs pay less than the jobs in traditional manufacturing. (Other sectors such as agriculture have suffered strong job losses resulting in an increase in informality and international migration).
• In South America, exports have concentrated in natural-resource-intensive goods, whose production is typically capital intensive. The manufacturing sector was negatively affected by import competition, causing a net loss in jobs and an increase in informality. During 2003-2008, the increase in commodity prices and a competitive exchange rate helped to strengthen the internal market and develop national industries. There was an increase in formality rates in Argentina and Brazil, buoyed by policies that increased the value of the minimum wage and strengthened the internal market.
Increase in Informality in Latin America
Informality (%)
(PREALC definition)
1990 42.8
1995 46.1
2000 46.9
2005 48.8
2008 46.2
Source: ILO, Labour Overview, several years.
Urban unemployment, Latin America Latina and the Caribbean, 2000-2009
10.4
11.4
10.5
8.8
8.17.5
11.410.5
9.2
8.5
4
5
6
7
8
9
10
11
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*
Source: ILO, Labour Overview, 2009.
Different areas to address
Monetary and exchange rate policy
Industrial policy
Labour market policies and institutions
Tax and redistribution policies
There is a need to protect workers, but how should it be done?• Public policies specifically designed for workers affected
by trade
– US: “Trade Adjustment Assistance” Programme (TAA)
– Wage subsidies for displaced workers above the age of 50 (France, Germany)
• Traditional labour market policies, both passive as well as active
Spending on Labour Market Policies (% GDP): The Americas compared with Europe
4.94.4 4.3
3.0 3.02.5
1.9 1.8
0.8 0.6 0.5 0.5 0.41.0
0.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Source: OECD, IDB.
Active Labour Market Policies as an Automatic Stabilizer
TrainingSubsidies for hiring
Direct employment creation programmes
Source: Based on Quiggin (2001).
Job shedding
Job creation
But there is also a need for unemployment insurance
0
17
13
41
0
2
4
6
8
10
12
14
16
18
969 - 3940 3941 - 6912 6913 - 9883 9883 -12855 >12855
International Geary Khamis dollars, 1990
Nu
mb
er
of C
ou
ntr
ies
Source: Berg and Salerno (2008).
The importance of the State
To benefit from globalization, a stronger State is needed. Investing in physical infrastructure, improving the
educational system, professional training, and social protection systems (unemployment insurance, pensions, health care), requires the collection of taxes. The tax systems should be made progressive.
The importance of tax policy
With the exception of Brasil, tax collection on the part of Latin American governments is very low.