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June 19, 2007
Wages and skills
The OECD Employment Outlook 2007 is out and one of the stories is increased worry about the downside of globalization:
Does globalisation, notably the integration of China and India in the world economy, render workers less secure or reduce their bargaining power? What are the implications of offshoring for employment and earnings? What can policy-makers do to ensure that workers receive their fair share of the gains from globalisation?
Of course, that is only a portion of the report -- but the most headline grabbing. It is also the topic of the lead "editorial" in the report: Addressing the globalisation paradox
It seems, however, that the report may have missed part of the story. As the Wall Street Journal (Offshoring and Cheap Imports May Hurt Workers, OECD Says) points out:
But trade isn't the main culprit, the OECD claims: The spread of computer technology -- even harder to reverse than Chinese imports -- is the main thing that is creating a widening gap between the incomes of low-skilled and high-skilled workers, it argues.
The interplay of trade and technology - and the changing nature of work - is likely to explain a lot of economic insecurity at all level of skills. It is not just the low skilled who are affected - although they bear the brunt of the change. But increasingly tradable high skill activities are rising everyone's level of concern.
As Kenneth F. Scheve and Matthew J. Slaughter say at the start of their new Foreign Affairs article (A New Deal for Globalization):
In contrast to in earlier decades, today it is not just those at the bottom of the skill ladder who are hurting. Even college graduates and workers with nonprofessional master's degrees saw their mean real money earnings decline.
Dealing with that decline will take more than some transfer payments for the winners to the losers, which is essentially what Scheve and Slaughter suggest. I like the idea of a more progressive tax system and eliminating the regressive payroll taxes. AS they argue, this would be a major step beyond bolstering education and adjustment assistance. But even that is not sufficient. It will take a deeper understanding of how economic activity has changed. Until we have that understanding, our policy prescriptions are, unfortunately, little more than band-aids.
Posted by Ken Jarboe at June 19, 2007 4:43 PM
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