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Job markets are less globalised than assumed

Tuesday, February 26, 2019

Subject

Labour market globalisation.

Significance

The widely assumed increases in the global interconnection of national labour markets over recent decades should, if true, weaken national policy arguments for domestic fiscal stimulus, strengthen those for currency devaluation and vocationally focused education, and reduce the ability of workers and unions to bargain for higher wages. However, analysis by the Asian Development Bank (ADB) of three channels of trade connectivity across 40-68 countries from 1995 to 2016 suggests that labour markets are far from universally globalised or, in many countries, globalised in one channel but not others.

Impacts

  • Uncritically accepting the labour market ‘globalisation-everywhere’ discourse risks choosing policies that could increase inequality.
  • Evidence of less-globalised-than-thought job markets implies that, for many governments, increasing spending will boost domestic activity.
  • Devaluation is becoming less useful in stimulating domestic activity because the share of workers employed in tradable sectors is falling.
  • International coordination of stimulus policies has only become more important for some, not all countries.
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