Trade, technology and jobs    

Wasi Ahmed     | Published: October 10, 2017 21:36:40 | Updated: October 25, 2017 05:43:25

The correlation between and among trade, technology and jobs has been a subject of discussion for long. Another issue gaining increasing prominence is inequality. That is to say, although trade and technology have driven global economy to a commendable growth over the past quarter century, the costs are starkly felt in social structures and are manifested through inequality and disruptions in the job markets. Those who contest this view, agree about the rising inequality, and opine that this unfortunate outcome reflects the need for stronger safety nets and better social and labour programmes, and not a retreat from globalising trade.

A World Bank (WB) study of 27 industrial and 13 developing countries finds that shutting off trade would deprive the richest 10 per cent of 28 per cent of their purchasing power, but the poorest 10 per cent would lose 63 per cent because they buy relatively more foreign goods. In many developing countries, export growth has been associated with greater gender equality. Exporting firms generally employ a significantly higher number of women than non-exporters. In Bangladesh and Cambodia's export-oriented garment sector, which is one of the main providers of wage employment, 85 per cent of all workers are women. Moving away from global integration would erode these gains, especially in developing countries.

The WB study shows that there are invariably losers as well as winners from trade and globalisation. Households are likely to be affected differently depending on their physical and human capital endowments, their consumption patterns and incomes. Among developing countries, according to the study findings, there are countries where the direct effect of trade on the wage distribution has been equalising (e.g. Brazil), and others where it has been un-equalising (e.g. Mexico). However, it remains a difficult task to quantify the potential tradeoff between the efficiency gains and inequality costs of trade liberalisation as it involves so many variables and not taking account of all may yield an unauthentic picture.

One of the core issues in this context is to examine how technology and trade affect labour markets. The World Trade Organisation (WTO) in its 2017 edition of the World Trade Report (WTR) has dealt with the subject in an articulated way. The WTR notes that while the scale and pace of recent global economic change is unprecedented, the process is not new. Ultimately, continued economic progress hinges on the ability of economies to adjust to changes and promote greater inclusiveness. While today's labour market problems are largely traceable to domestic policy shortcomings, a failure to find answers could have global ramifications. Some of the important findings in the WTR are:

- labour market evolution remains highly diverse across countries with some general trends;

 -trade tends to increase employment and wages, but not all workers may benefit, as regional and individual differences determine how gains are shared;

-globally, millions of individuals work in trade-related activities;

-labour market changes and the composition of employment are driven by technological progress;

-domestic policies, macroeconomic conditions and barriers to worker mobility play an important role in determining how the benefits associated with technological change and trade are shared.

Labour market evolution, according to the WTR, has been 'marked by a higher share of educated workers, increasing participation of women, declining participation of men, and an increasing number of non-traditional arrangements, such as work based on temporary contracts, part-time work and self-employment.' The share of workers in services continues to grow in both developed and developing economies, while the share of workers in agriculture and manufacturing is declining or stagnating in developed countries and increasingly in developing countries. At the same time, the share of high and low-skilled occupations in total employment has increased and the share of middle-skill occupations has declined in developed economies and a number of developing countries, the Report says, and aptly indeed.

The report further adds that the overall labour market evolution is different across countries, suggesting that country-specific factors play a vital role. Factors, such as macroeconomic conditions, labour market institutions and mobility frictions or obstacles, vary widely across countries, but play an important role. 'Although trade opening tends to increase overall employment and wages, certain regions, sectors and individuals may be left worse off in the absence of adequate policy responses', the report says.

It is undeniable that with technological change, trade increases the relative demand for high-skilled workers, especially in non-conventional occupations, as well as nominal wages of high-skilled workers relative to low-skilled workers in both developed and developing countries. Technology makes some products or production processes obsolete, and creates new products or expands demand for innovative products. Current technological progress has led to a relatively higher demand for skilled workers and a lower relative demand for workers performing conventional activities.

The share of export-related jobs in domestic employment can reach up to 30 per cent of total employment in some countries, the report says. Import-related activities support job creation by improving firms' competitiveness and creating downstream jobs. In addition, both exporting and importing firms pay higher wages than firms focusing exclusively on domestic market.

Through a mix of adjustment, competitiveness and compensation policies, the WTR concludes, governments can help workers to manage the cost of adjusting to technological change and trade, while making sure that the economy captures as much as possible the benefits from these changes.

Although the WTR findings are broad based, it does lend deep insight into the evolution process of labour market, wage structure, gender implications. For developing countries like Bangladesh, the critical task is to bring adjustments in trade, technology and labour market keeping in view not only the productivity and employment in various sectors but also the political, social and economic circumstances.


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