The Challenge of the Growing Globalization of Labor Markets to Economic and Social Policy

Trade, global capital mobility, immigration, and the spread of computer-based information technology is creating a new global labor market that substantially impacts workers in the United States and elsewhere and will have even larger effects in the foreseeable future. When countries around the world signed the diverse global and regional trade agreements that reduced tariffs in the latter part of the twentieth century, most economists expected that economic transactions between advanced countries and developing countries would consist largely of trade in manufactured goods and raw materials. Skilled workers in advanced countries would benefit from increased trade with developing countries as the advanced countries export skill-intensive goods and services. Less-skilled workers in the developing countries would benefit from greater trade with advanced countries as the developing countries export products made by less-skilled labor. The increased demand for skilled workers in advanced countries was expected to increase inequality in those countries while the increased demand for less-skilled workers in developing countries was expected to reduce inequality in those countries. In both sets of countries, globalization was expected to spur economic growth and raise living standards broadly.