Policy Brief: Helping workers to navigate in ‘globalised’ labour markets

Fears that 'globalisation' implies increasing job losses and lower wages are an important source of popular ambivalence towards the increasingly open character of OECD economies. Although such concerns are not new, recent developments appear to have heightened workers' apprehensions that rising trade competition threatens their jobs, wages and employment conditions, particularly in the higher-wage OECD countries. Increased international sourcing of production activities - including the 'offshoring' of some white-collar jobs in information technology (IT) and business services - has led some commentators to conclude that a large share of high-wage OECD workers will soon be in direct competition with workers in countries where wages are far lower. EU enlargement and the increasing integration of large, labour-surplus economies such as India and China into the world trading system also reinforce anxieties about 'delocalisation' and 'a race to the bottom'.

But these negative concerns are often belied by the evidence. Trade and investment liberalisation, although disruptive for some workers' careers, is an important source of rising living standards for the overall population. Over the years OECD countries have achieved higher productivity and average real wages as they have increasingly specialised in producing goods and services in which they have a comparative advantage. Furthermore, increased openness to international trade and investment has not resulted in lower employment rates.

This policy brief reviews recent OECD analysis of the role of rising international economic integration in fuelling insecurity about employment and earnings for OECD workers, as well as what is known about best-practice policy responses. Trade-related job losses are best viewed as being part of a broader policy challenge, that of adjusting successfully to structural economic change. A recent OECD study emphasises that the drivers of structural economic change include not just international trade and investment, but also factors such as technological and demographic changes. Meeting this broader challenge requires policy responses that extend far beyond the labour-market programmes emphasised in this Policy Brief. Nonetheless, labour-market and social safety-net policies play a critical role.