Globalization and Unemployment

By Richards, Peter | International Labour Review, January 1, 2000 | Go to article overview

Globalization and Unemployment


Richards, Peter, International Labour Review


Wagner, Helmut (ed.). 2000. Globalization and unemployment Berlin, Springer-- Verlag Berlin, 2000. vi + 401 pp. Figures, tables. ISBN 3-540-66765-2.

This book consists largely of essays commissioned for a conference held in March 1999. Its publication has thus been speedy. One point of interest is that the vast majority of contributors qualified in German universities and are teaching in Germany. While aspects of labour market behaviour and of social security in Germany are discussed, most of the book reviews OECD experience and theories of employment and unemployment developed on both sides of the Atlantic. The book is thus in one way deliberately local but in another perfectly global.

It can hardly be said that the reviews and analysis it contains offer much that is new. Nonetheless it features perhaps five pieces, especially those of Beissinger and Moller; Landman; Berthold and Fehn; Kromphardt; and, to a lesser extent, that of Schettkat and Verhagen, which reward serious reading. Other essays - by Belke and Gros, by Fuest, Huber and Wohlbier and by the editor, Wagner - relate less to labour market behaviour and employment and are of more academic interest. Finally, perhaps in order to justify the inclusion of "globalization" in the title, two pieces by Fischer and Citrin and by O'Rourke (based on joint work with J. Williamson), are included. The first of these is adapted from the May 1997 World Economic Outlook of the IMF and is too short to do justice to the original publication. The other is a summary of a considerable volume of work by both authors on nineteenth-century globalization. It is here only to whet the appetite and many references are given which can be followed up. It has little relevance, however, to the publication under review which might be better entitled "European unemployment in the 1990s". Developing countries' unemployment problems, some of which can be traced to liberalization (and globalization) are not discussed.

Beissinger and Moller in their chapter, "Unemployment: Theoretical explanations", first discuss the structural model which has the "non-accelerating inflation rate of unemployment" (NAIRU) depending on the degree of real wage rigidity, which is usually believed to be higher in Europe than the United States. Unemployment is unaffected by demand changes, except in the very short run. But this model has difficulty in explaining a persistent rise in unemployment, for which other explanations can be found. These include "insider-- outsider" issues (retained workers obtaining higher wages when colleagues are dismissed), high hiring and firing costs and the loss of employability by the long-term unemployed. All these can be worsened by restrictive demand management. In addition to the above, there are explanations which look at effects on different sections of the labour force, e.g. skilled and unskilled workers. These are usually trade or technology based. The authors point out that this is not an either-or choice but that, with advances in technology, wealthier countries import products in an intermediate state taking advantage of lower wage and skill levels elsewhere. So both trade patterns and technology advance work against the employment of unskilled labour. However, they also note that the low skilled can also benefit from the higher productivity of the higher skilled, thus "the real wage decline for low skilled US workers cannot be attributed to this (skill biased technology change) cause".

In his chapter, entitled "Wages, unemployment and globalization: A tale of conventional wisdoms", Landman dismisses the hypothesis that there is a choice between higher wage growth (chosen by France and Germany, for example) and employment growth (chosen by the United States). Higher wage growth does not lead to high productivity growth, which is determined by other factors, including convergence with the high absolute productivity country (which for many industries remains the United States). …

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