Effects of Globalization

Topics: World Trade Organization, Globalization, International trade Pages: 7 (2131 words) Published: May 15, 2013
Globalisation has been the most debated topic among businesspeople, economists and politicians in the recent years. Globalisation is defined as “the shift towards a more integrated interdependent world economy” (Hill, Cronk, & Wickramasekera, 2008). The trend towards greater globalization has been driven by two macro factors. The first factor is the declining trade and investment barriers that have occurred since the end of World War 2 (Hill, Cronk, & Wickramasekera, 2008). The next factor is the dramatic technology developments in recent years in communication, information processing and transportation (Hill, Cronk, & Wickramasekera, 2008). The following research will focus on the positive and negative impacts of globalisation on jobs, wages, the environment, working condition and national sovereignty. Jobs

Heckscher-Ohlin theory asserts that more abundant a factor, the lower its cost (Hill, Cronk, & Wickramasekera, 2008). High population countries like China and India, which provide abundant labours in low cost, can attract more investment from overseas. Hence, globalization can boost greater employment opportunities in less developed countries (Ghose, 2000). For example, the rapidly expanding rose industry in Ecuador generates US$240 million in sales and supports tens of thousands of jobs in Ecuador (Thompson, 2003). Apart from that, India’s computer-software and service, which is undertaking the outsourced office functions for companies based in United States, Australia and the United Kingdom, has employed 1.3 million people in 2006 (Bhattacharjee, 2006). In addition, Accenture, which is a large US management consulting and information technology firm, has recently created 5000 jobs opportunities in software development and accounting in Philippines (Birnbaum, n.d.). Procter & Gamble has also employed 650 professionals who prepare the global tax returns for the company in the Philippines (Engardio, Bernstein, & Kripalani, 2003). The ANZ bank in Australia decided to increase 1100 employees in its Indian Information Technology operations based in Bangalore (The Sydney Morning Herald, 2005). Logitech as one of the world’s largest producers of computer mouse, has employed 4000 workers to assemble mouse in its own factory in Suzhou, China (Chief Executive, 2003).

However, globalization critics argue that technological change in globalization that favored skilled workers may have further depressed the demand for low-skilled workers (Goldberg & Pavcnik, 2007). Nissanke & Thorbecke (2008) also claim that new technology is heavily biased in favour of skilled and educated labour. Globalization is a threat for jobs losses to countries with lower cost structures due to lack of regulation or inadequate enforcement of labour, health, safety and environmental standards (Foley, 2006). For example, over 350 workers were retrenched in Australia and New Zealand as the manufacture plant of the iconic boot maker, Blundstone, would be shifted to Asia (Barlow, 2007). Apart from that, the Bank of America cut nearly 5000 jobs from its US-based information technology workforce and transferred some of these jobs to India since the work that costs $100 an hour in the United States can be done for $20 an hour in India (Engardio, Bernstein, & Kripalani, 2003). Apply the mercantilism theory, the ANZ bank’s step to increase employees in Bangalore will cost job loss in Australia while trying to save cost for the bank. Wages

Workers in less developed countries can earn higher wages as a consequence of globalization (Brunner, 2003). Lustig’s study (1998) also shows that wages of skilled workers increased by more than 15 percent. For instance, a worker in Ecuador earns the equivalent of US$210 a month which is substantially above the country’s minimum wage of US$120 a month (Thompson, 2003). Levi Strauss & Co favours to do business with partners who provide wages and benefits that fulfill...
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