Fri, Jun 22, 2007 - Page 9 News List

Globalization's challenges are multiplying

By Ashley Seager  /  THE GUARDIAN , LONDON

Globalization has reduced the bargaining power of unskilled workers and pushed up inequality in many Western countries, the OECD said this week, urging governments to improve their social safety nets.

The Paris-based rich nations club said in its annual Employment Outlook that the prospect of offshoring was likely to have increased the vulnerability of jobs and wages in developed countries.

The report stressed that though more open trade and investment policies had a powerful upward effect on living standards around the world, "some workers may lose from globalization." It says these were usually those working in industries in Western countries that decline as a result of competition from cheap imports.

"Millions are benefiting from globalization but at the same time there's a feeling something's wrong with the process," OECD Secretary-General Angel Gurria said.

Governments needed to address public concern over jobs and pay in a world being transformed at unprecedented speed by technology, cheap transport and communications, and the rise of China, Russia, India and Brazil with vast pools of cheap labor, he added.

Those four countries account for 45 percent of the world labor supply today, compared to 19 percent for the OECD countries, which include the US, Japan and much of Europe.

The report pointed to a "remarkable" fall in the share of wages of national income in OECD member countries in the past couple of decades. Japanese wages have fallen by around a quarter as a share of GDP in the past 30 years, while they have dropped 13 percent in the 15 wealthier EU countries and 7 percent in the US, the report showed. US wages as a share of GDP remain ahead of those in the EU.

The report also showed rising wage inequality in most OECD members over the past decade with the notable exceptions of Spain and Ireland.

In Britain, the gap between rich and poor remained virtually unchanged, although its level was one of the higher ones. The figures run only to 2005, though, since when inequality in the UK has increased on the government's own measures.

Some of the biggest increases in the OECD were in Poland, Hungary and South Korea. Inequality widened only slightly over the past decade in the US but is at the upper end of the scale.

The US also saw the biggest increase in the wealth of those at the very top of the income scale, along with Canada. Increases in Britain, Japan and France were more subdued, the report showed.

Offshoring, where companies reallocate production or services to cheaper places, was not as big a job-killer in OECD countries as believed, said Gurria.

And offshoring is not the preserve of "Anglo-Saxon" economies such as the UK and US. Indeed, the US remains one of the smallest offshorers in the OECD whereas countries such as Sweden, Norway, Belgium and the Netherlands are among the biggest.

The OECD urged governments to resist protectionist responses and instead adapt employment policies to help people move from one job to another with greater ease and sense of security. It singled out Denmark and Austria as having good policies to help workers adapt to change.

Gurria said some people had lost out, but this was something policies should tackle because globalization was a positive and inevitable process.

"It's how you make the best out of it," he said.

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