Day 228 Globalization

Globalization

The globalization has become the trend of development in the past decade. When the economy opens to the world for trade, it is very common to see that domestic industry to be hurt by the foreign imported products. Since the imported goods will generally have lower price or higher quality.

The effect of this increased foreign import may have serious consequences. The demand of labor in the domestic industry will decline, due to the value of marginal product has dropped. The reduced real wage and employment quantities will drive workers mobilized to the exporting industry market, which benefited by the globalization. This market will offer more place and higher wages, since the firms are earning more than before. During this worker mobility process, government may provide transition aid such as training to workers. As we know, the technology change will boost the productivity of workers, but it may vary the real wage differently on different workers. For instance, the skill-biased technological effects the marginal products of higher-skilled workers differently from lower-skilled workers. Thus the firm will seek more higher-skilled workers and fewer lower-skilled workers. In addition, an accountant may lose his job, due to the fast development of accounting software such as MYOB, Quicken simply reduce the quantity needed for perform the task. By studying the labor market, we observe the quantity of labor demanded can be less than the labor supplied. Therefore, there are people experiencing unemployment. The unemployment is considered to be a cost for the society, due to the workforce is not fully utilized. It also creates physiological and social costs that make the society unstable. The unemployment has been divided into for types: firstly, there are always natural unemployment rates, which is independent of the economy’s performance. In addition, the frictional unemployment is less concerned because is the short-term situation caused by the workers searching for the right job. Besides the last two types of unemployment, the structural unemployment is the true burden over the government. People are unemployed due to the lack of skills of aspirations leads this long-term and chronic unemployment. Furthermore, the cyclical unemployment occurs when the economy is experiencing contraction. 

As an economist, the aim to fully utilize the workforce to product the maximum output, but there are other impediments to full employment. To illustrate, the minimum wage laws, labor unions, and other employee beneficiary regulations that increase the unit labor cost will prevent to an employer to hire the social optimal level of labors.