Globalization Effects

Job security stands as probably the greatest problem to be resolved in relation to the current movement towards Globalization. Mark Thoma presents an excellent piece today on the decline of Job security. The Periods of Job loss create severe damage to individual lifestyles; I have yet to any Economist readjust lifetime Wages on the basis of factoring in an estimate of Wage cut including the lost period of Work. The loss would be very substantial with shift over the entire spectrum of Worklife. Lifestyle can only be maintained with continuity of labor to build capital assets.

Another inherent problem centers around the actual value of Globalization. This author has often doubted the true worth of Globalization, thinking it contains much of it’s value only in the context of saved Taxes, and in non-payment of earned Wages. It might be different if Globalization had actually resulted in concentration of Capital; but rather than a reduction of Capitalization Costs, there appears to be a multiplication of such Capitalization Costs which is paid by reduced Wages of the labor involved. No One factors in the Transportation Costs involved within Globalization as well, such Costs probably cancelling much of the Business savings coming from reduced Benefit packages to labor; Economists ignoring the later because it leads to creation and expansion of a new industry. The overall loss to Labor, though, might negate any real advantage to Globalization, other than Business Tax escape allowed by corrupted Tax law, which basically deducts Investment Costs no matter where the Investment occurs.

Quotes from Andrew B. Bernard can enhance the relative knowledge of Globalization:

Even in sectors where the United States is thought to have comparative advantage, such as Instruments, a majority of firms produce only for the domestic market. Similarly, some firms are exporting even in net import sectors such as Textiles and Apparel.

Second, exporters are substantially and significantly different than non-exporters, even in the same industry and region. Exporters are dramatically larger, more productive, pay higher wages, use more skilled workers, and are more technology- and capital-intensive than their non-exporting counterparts

"potential" exporters have better characteristics years before they enter a foreign market, including higher productivity, higher wages, and larger size. However, the most important finding was that exporters do not have higher productivity growth even though they have higher levels of productivity.

high productivity firms are able to pay the sunk costs of entering foreign markets but that, once in, they do not receive an extra productivity kick.

In a study of the role of firm structure and multinational ownership on plant deaths, we find that exporting is strongly correlated with survival at U.S. plants, even after controlling for productivity and numerous other plant, firm, and industry characteristics. Ownership by a multinational, however, substantially increases the conditional probability that a plant will close.

These results suggest that the effects of trade on labor market outcomes may not be confined to job losses in comparative-disadvantage sectors.

The price declines associated with these productivity increases inflate the real-wage gains of relatively abundant factors while dampening, or even potentially overturning, the real-wage losses of relatively scarce factors. (I have real difficulty with this one, in the face of the increased overall Inflation associated with Trade.)

High levels of import competition from low wage countries are bad for plant growth and survival but are especially problematic for low-capital, low-skill plants in any industry. In addition, we find that plants facing high levels of competition from low-wage countries are more likely to change their output mix towards products made with more capital and more skilled labor. This discovery of product switching in response to foreign competition has led to a new series of papers documenting the extraordinary amount of ongoing product switching in the U.S. economy.¹

increased wage inequality was largely associated with changes in employment across plants in the same industry and that rising demand for exports played an important role in this employment shift

Of the 5.5 million firms operating in the United States, only 4.1 percent engage in importing or exporting. However, these trading firms are hugely important in the U.S. economy, accounting for more than 47 percent of total employment and typically importing and exporting multiple products. Even among the firms that trade, the most globally-engaged dominate: more than 95 percent of U.S. trade is conducted by just 10 percent of the trading firms (0.4 percent of all firms) and multinationals operating in the United States account for more than 90 percent of U.S. imports and exports.

This data tells Us that both the Import and Export Trade are driven by multinationals, who have the highest record of Plant closings. The greatest impact on Wages comes from inside industries, and not across industries, so that it is deliberate manipulation to reduce Wages by the major firms; direct impact upon Wages. Trade is initiated by those firms who endure the highest Wage and Benefit packages to labor. The switch does not provide major productivity gains, and that Wage losses affect the entire economy. lgl