What’s the impact of globalization on wages, jobs and the

cost of living?
Several academic studies have shown that trade liberalization often has a negative impact on wages
and employment for specific groups of people – from industry workers in the US to farmers in India.
These studies are important and informative, but there are some nuances to keep in mind.

1. Narratives that focus on winning and losing countries miss the point. Globalization
impacts the standard of living of different types of workers to different degrees within countries,
in all countries.
2. The negative effects of trade on earnings tend to be concentrated in specific areas and
industries. Aggregating across regions and firms gives us a different picture.
3. Trade also affects consumer prices; not just wages. Most studies approximate the impact
of trade on welfare by looking at how much wages can buy, using as reference the changing
prices of a fixed basket of goods. This fails to consider welfare gains from increased product
variety and obscures complicated distributional issues, such as the fact that poor and rich
individuals consume different baskets so they benefit differently from changes in relative
prices. Studies measuring the distribution of welfare gains, across all the main relevant welfare
channels are only beginning to emerge.
What’s the impact of trade on jobs and wages?
Evidence from Chinese imports and their impact on factory workers in the US

The most famous study looking at this question is Autor, Dorn and Hanson (2013): “The China
syndrome: Local labor market effects of import competition in the United States”. 1

In this paper, Autor and coauthors looked at how local labor markets changed in the parts of the
country most exposed to Chinese competition, and they found that rising exposure increased
unemployment, lowered labor force participation, and reduced wages. Additionally, they found that
claims for unemployment and healthcare benefits also increased in more trade-exposed labor
markets.

The visualization here is one of the key charts from their paper. It’s a scatter plot of cross-regional
exposure to rising imports, against changes in employment. Each dot is a small region (a ‘commuting
zone’ to be precise). The vertical position of the dots represents the percent change in manufacturing
employment for working age population; and the horizontal position represents the predicted
exposure to rising imports (exposure varies across regions depending on the local weight of different
industries).

The trend line in this chart shows a negative relationship: more exposure goes together with less
employment. There are large deviations from the trend (there are some low-exposure regions with big
negative changes in employment); but the paper provides more sophisticated regressions and
robustness checks, and finds that this relationship is statistically significant.

This result is important because it shows that the labor market adjustments were large. Many workers
and communities were affected over a long period of time. 2
But it’s also important to keep in mind that Autor and colleagues are only giving us a partial
perspective on the total effect of trade on employment. In particular, comparing changes in
employment at the regional level misses the fact that firms operate in multiple regions and industries
at the same time. Indeed, IldikóMagyari recently found evidence suggesting the Chinese trade shock
provided incentives for US firms to diversify and reorganize production. 3

So companies that outsourced jobs to China often ended up closing some lines of business, but at
the same time expanded other lines elsewhere in the US. This means that job losses in some regions
subsidized new jobs in other parts of the country.

On the whole, Magyari finds that although Chinese imports may have reduced employment within
some establishments, these losses were more than offset by gains in employment within the same
firms in other places. This is no consolation to people who lost their job. But it is necessary to add this
perspective to the simplistic story of “trade with China is bad for US workers”.

Exposure to rising Chinese imports and changes in employment across local labor markets in the US
(1999-2007) – Autor, Dorn and Hanson (2013)

Evidence from the expansion of trade in India and the impact on poverty reductions

Another important paper in this field is Topalova (2010): “Factor immobility and regional impacts of
trade liberalization: Evidence on poverty from India”. 4

In this paper Topalova looks at the impact of trade liberalization on poverty across different regions in
India, using the sudden and extensive change in India’s trade policy in 1991. She finds that rural
regions that were more exposed to liberalization, experienced a slower decline in poverty, and had
lower consumption growth.

In the analysis of the mechanisms underlying this effect, Topalova finds that liberalization had a
stronger negative impact among the least geographically mobile at the bottom of the income
distribution, and in places where labor laws deterred workers from reallocating across sectors.

The evidence from India shows that (i) discussions that only look at “winners” in poor countries and
“losers” in rich countries miss the point that the gains from trade are unequally distributed within both
sets of countries; and (ii) context-specific factors, like worker mobility across sectors and geographic
regions, are crucial to understand the impact of trade on incomes.

Evidence from other studies

 Donaldson (2018) uses archival data from colonial India to estimate the impact of India’s vast
railroad network. He finds railroads increased trade, and in doing so they increased real
incomes (and reduced income volatility). 5

 Porto (2006) looks at the distributional effects of Mercosur on Argentine families, and finds this
regional trade agreement led to benefits across the entire income distribution. He finds the
effect was progressive: poor households gained more than middle-income households,
because prior to the reform, trade protection benefitted the rich disproportionately.6

 Trefler (2004) looks at the Canada-US Free Trade Agreement and finds there was a group
who bore “adjustment costs” (displaced workers and struggling plants) and a group who
enjoyed “long-run gains” (consumers and efficient plants).  7

From income to welfare: a closer look at the ‘expenditure channel’

The fact that trade negatively affects labor market opportunities for specific groups of people does not
necessarily imply that trade has a negative aggregate effect on household welfare. This is because,
while trade affects wages and employment, it also affects the prices of consumption goods. So
households are affected both as consumers and as wage earners.

Most studies focus on the earnings channel, and try to approximate the impact of trade on welfare by
looking at how much wages can buy, using as reference the changing prices of a fixed basket of
goods.

This approach is problematic because it fails to consider welfare gains from increased product
variety, and obscures complicated distributional issues such as the fact that poor and rich individuals
consume different baskets so they benefit differently from changes in relative prices. 8

Ideally, studies looking at the impact of trade on household welfare should rely on fine-grained data
on prices, consumption and earnings. This is the approach followed in Atkin, Faber, and Gonzalez-
Navarro (2018): “Retail globalization and household welfare: Evidence from Mexico”. 9

Atkin and coauthors use a uniquely rich dataset from Mexico, and find that the arrival of global retail
chains led to reductions in the incomes of traditional retail sector workers, but had little impact on
average municipality-level incomes or employment; and led to lower costs of living for both rich and
poor households.
The chart here shows the estimated distribution of total welfare gains across the household income
distribution (the light-gray lines correspond to confidence intervals). These are proportional gains, and
are expressed as percent of initial household income.

As we can see, there is a net positive welfare effect across all income groups; but these
improvements in welfare are regressive, in the sense that richer households gain proportionally more
(about 7.5 percent gain compared to 5 percent). 10

Evidence from other countries confirms this is not an isolated case – the expenditure channel really
seems to be an important and understudied source of household welfare. Giuseppe Berlingieri,
Holger Breinlich, Swati Dhingra, for example, investigate the consumer benefits from trade
agreements implemented by the EU between 1993 and 2013; and they find that these trade
agreements increased the quality of available products, which translated into a cumulative reduction
in consumer prices equivalent to savings of €24 billion per year for EU consumers. 11

Distribution of total household welfare gains from the arrival of foreign retail chains in Mexico – Atkin,
Faber, and Gonzalez-Navarro (2018)

Wrapping up: Net welfare effects and implications

The available evidence shows that, for some groups of people, trade has a negative effect on wages
and employment opportunities; and at the same time it has a large positive effect via lower consumer
prices and increased availability of products.

Two points are worth emphasising.

For some households, the net effect is positive. But for some households that’s not the case. In
particular, workers who lose their job can be affected for extended periods of time, so the positive
effect via lower prices is not enough to compensate them for the reduction in earnings.

On the whole, if we aggregate changes in welfare across households, the net effect is usually
positive. But this is hardly a consolation for those who are worse off.

This highlights a complex reality: There are aggregate gains from trade, but there are also real
distributional concerns. Even if trade is not a major driver of income inequalities, it’s important to keep
in mind that public policies, such as unemployment benefits and other safety-net programs, can and
should help redistribute the gains from trade.

The Economic Benefits of Globalization

There are many different ways to examine how globalization has improved
businesses, living standards and the performance of the entire economy. Let us
start, however, with a quick primer on trade and what economists mean when
they are talking about globalization.

The period of globalization, between 1980 and 2010, is unique because global
trade grew very fast. Obviously, international trade developed in the decades
before 1980, and there has also been some growth after 2010, but none of these
periods come close to the expansion of trade during the era of globalization. The
same is true for Foreign Direct Investments (FDI): it multiplied by many times
between 1980 and 2010.

Chart 1 and 2 make these developments visible. Chart 1 is an index of global

exports – or how global exports have grown – between 1800 and 2014. In rough
terms, trade growth was low and flat for about 150 years. The first acceleration of
trade started in the 1950s, and all the trade in the world grew by about ten times
between 1950 and 1980. However, the real boom came between 1980 and 2010.
Remarkably, international trade grew by almost 35 times in that period. But the
chart also shows, trade has not been growing much in the past years. The global
financial crisis in 2008 led to a big collapse in trade. It recovered in the following
two years, but then trade dropped again, and since then, trade has basically
flatlined.
Chart 1: An Index of Global Trade between 1800 and 2014

Source: Federico, G. and Tena-Junguito, A., 2016, A Tale of Two Globalizations:

Gains from Trade and Openness 1800-2010. Centre for Economic Policy
Research Working Paper 11128

Chart 2, on the other hand, looks at the development of the global stock of FDI
between 1980 and 2016.[1] The development has been even starker for FDI than
for trade. In that period, the global stock of FDI grew from 0.7 to 25 trillion US
dollars.

Chart 2: Global Foreign Direct Investments (stock, million US Dollar

at current prices)
 Source:
UNCTAD

What also makes the three decades between 1980 and 2010 unique is that
international trade gradually became global. In the first decades after the Second
World War, trade had mostly been about exchange between developed economies
or, in practical terms, between countries in Europe and North America. Some
countries like Japan joined the bandwagon of international trade in the late
1970s, but the real geographical equalization of trade happened in the thirty years
that defined the period of globalization.

In those decades, many more countries opened themselves up to trade through

reductions of trade barriers and domestic reforms that made it possible to
exchange goods and services across borders (for instance, allowing the exchange
of foreign currencies) and enter into contracts with foreign firms. As a
consequence, they attracted investment from companies in other parts of the
world and their international trade grew very fast – indeed faster than at any
time in history.

Another way to look at the growing role of trade, is to compare the size of the
trade sector over time. The trade sector is defined by trade as a percentage of
Gross Domestic Product (GDP). For the world as a whole, the trade sector grew
from about 25 percent in 1960 to about 58 percent in 2016.[2] The role of trade
for GDP thus more than doubled in that period (just like with global trade, the
size of the trade sector has decreased since 2010, when it peaked at 61 percent).
Some countries have a much larger trade sector than the global average. In
Sweden, for example, the trade sector in 2016 was about 85 percent of GDP, and
Germany had exactly the same size of its trade sector.

Box 1: Jobs in the Export Sector

A growing trade sector means that a larger part of the workforce today has export-dependent jobs. A
study for the European Commission, for instance, estimates that the number of jobs dependent on
export to countries outside of the EU has grown from about 18.5 million in 1995 to 31 million in 2011.
That is a 67 percent growth, and it is particularly the number of high-skilled jobs that has increased.
[3] Yet a larger part of the workforce in the EU works in jobs that exports to other EU countries, which
is not included in the above figures. In Sweden, to take one example, the number of jobs dependent
on goods exports to other EU countries was estimated in 2014 to be about 1 million – and that is
more than 20 percent of the country’s labour supply.[4]

Three factors explain the flatlining of international trade in recent years. First,
there has been weaker growth of demand for goods – especially industrial goods
(e.g. steel and machinery) – that are intensively traded while the demand for
services that are locally produced (e.g. healthcare) has increased rapidly. While
that development is partly a natural factor of changing demand patterns, the
second factor is more noxious: protectionism. Governments across the world
have used the period since the crisis to substantially increase the amount of
policies that explicitly discriminate against foreign firms (see Box 2). Third,
explicit protectionism follows on the heels of a somewhat longer period of
increasing regulatory costs of trade (e.g. administrative costs for filing trade
documents with a Customs Authority).

Chart 3 shows that there has been a clear trend break in regulatory trade barriers
in the 2000s (the higher the index score, the greater the trade freedom and the
lower the regulatory restrictions). Up till then, the degree of freedom to trade
increased. Since then, however, regulatory restrictions on trade have increased
substantially. And it does not stop there. In addition to these regulatory costs to
trade come, for the services sector, different forms of non-trade regulations that
have made cross-border exchange more difficult. For instance, the use of
occupational standards that fracture the global services market has increased
substantially. There are about 800 occupational standards in Europe’s services
sector alone and, in the United States, 25 percent of the workforce now operate
under such a standard. [5] Many of them make it impossible to export a service to
another country because occupational standards are seldom mutually recognized.

Chart 3: Economic Freedom to Trade: An Index of Regulatory Trade

Barriers

Source:
Fraser Institute, Economic Freedom of the World Database

Note: Index rates are for subcomponent “Regulatory Trade Barriers” in the total
index, including nontariff barriers to trade and compliance costs of importing
and exporting. The higher the index score, the greater the trade freedom.

Box 2: Growing Protectionism in the World Economy

 
Protectionism is on the rise. Both developed and developing economies have for the past ten years
substantially increased the number of policies that are harmful to global trade and competition. Global
Trade Alert, a trade-monitoring project, has calculated that between November 2008 and November
2017, governments have introduced 6756 harmful measures. Governments have also taken
liberalizing measures, but the number of harmful measures outnumber the number of liberalizing
measure two-to-one. Most of the harmful measures have been the increase of an important tariff or
the introduction of a subsidy that discriminates against foreign companies and distorts competition.
[6] While these figures reflect trade in goods, the situation is not much different in the services sector.
Take for instance digital policy and attempts to impose measures demanding the localization of data,
a serious intervention in the digital economy. Between 1990 and 2016, the number of data-
localization measures globally has increased ten times.[7]

Globalization has Created New Business Opportunities

There are several explanations to the remarkable growth of trade over time, but
one obvious factor behind it has been firms and their business development. In a
way, the growth of exports is just another way of saying that firms have gradually
sold more to foreign customers or that foreign customers have played an
increasingly important role for the total sales by the corporate sector. When data
is informing us that global trade between 1980 and 2010 grew 35 times, it means
in practice that the corporate sector expanded their foreign sales by 35 times. Or
to take the example of a single country: Swedish firms expanded their foreign sale
from just north of 200 billion SEK in 1980 to more about 1500 billion SEK in
2010.[8] And to drill that down to the level of a firm: In 2010, telecom company
Ericsson had export sales from Sweden of 100 billion SEK, which in nominal
terms is more than twice as much as Ericsson’s total sales in 1990.[9] Back then,
Asia represented about 6 percent of Ericsson’s total sales. In 2010, that share had
gone up to 25 percent.[10]

As a thought experiment, try to imagine how a company would have evolved

without globalization. There is no way to fully understand a counterfactual
scenario like that, but it helps us to understand some of the differences in
business opportunity between alternative scenarios. And one difference is
obvious: if a company only has market access to the inhabitants in its home
country (in Ericsson’s case, ten million Swedes) it has to build another type of
business than if it has access to the global market. What is more, market size is of
particular importance for those companies that produce goods and services that
are innovative and have a high intensity of R&D or capital expenditures. If their
potential customer base is small, it means that every unit of sales has to recoup a
larger share of the investments the firm made in developing and producing a
product. The flip side of the coin, however, is that the growth of customers
abroad help these firms to spread development and production expenditures over
many more unit of sales.

Economists call this the scale benefit of globalization – and it is based in basic

economies of scale. It has also been one of the tangible benefits for the corporate
sector: globalization has enabled them to develop businesses that depend on sales
of many units and to many different customers. If Ericsson’s market for mobile
technology would be limited to Sweden it would have been impossible to build
basic GSM technology or develop the core equipment for 3G and 4G
communication. The same logic applies to many other sectors that require
substantial development and production costs: automobiles, chemicals,
computers, electronics, pharmaceuticals, and more. It is therefore unsurprising
that the expansion in global trade during the age of globalization happened to a
large extent in exactly these sectors.[11]

Another difference between the actual development and the imagined scenario of
a non-globalized world is that globalization created opportunities for
faster specialization of production and firms. Some would perhaps see that a
disadvantage, because gone are the days when an individual firm could build a
corporate imperium that produced a huge variety of different products, often
behind the protection of trade barriers. Look at Volvo. It is no longer a company
that produces trucks, buses, cars, drugs, beverages, and frozen food. Even the
automobile division is now split, with one part producing cars and the other
trucks, buses and heavy vehicles. Thirty years ago, the Finnish champion Nokia
was competing in many markets – television sets, household and paper products,
rubber boots, and electricity – and was just about to break in the market for GSM
handhelds. Now it is a specialized producer of telecommunication equipment
technology.

Box 3: Building Mobile Phones with 100 billion Components Every Year

 
As late as the end of the 1980s, a telephone in Europe was built from the first to the last component
in one factory. Compare that with the fragmented supply chain of modern production. At its height in
the global handset market, Nokia was estimated to handle more than 100 billion components every
year. In 2006, its plants produced around 900,000 mobile phones – and handled around 275 million
components every day. Most of these components were procured from other companies –
specialized in producing parts and components – and imported to the countries where Nokia had
located its factories. A low estimate is that half of the number of components used to build a mobile
phone has crossed a border. From one telephone to 100 billion components in less than two decades
– this is the story of modern globalisation.[12]

Specialization creates business opportunities because it is easier to step into new

markets when it is not necessary to be a large entity with strong control over end
customers. Markets that are specialized usually have greater space for new
companies and they certainly make it possible to compete on the basis of new
technology and a good offer. A company that is a skilled producer of automobile
engine components does not need to produce an entire car and compete with
larger firms such as Volkswagen and Toyota on the end customer market. They
can rather allocate all their resources to become even more competitive
producers in engine components. That means, among other things, that their
resources (e.g. staff and technology investments) can be and become more
specialized.

It is for this reason that the age of globalization experienced a growth in global
trade that, functionally, reflected the breakup of large multinationals into
fragmented supply and value chains.[13] No large company has enough resources
to become specialized producers in all parts and components that it needs in
order to produce a good or service.[14]

If companies had to rely on just domestic markets for their sales and inputs, they
would not have been able to innovate and develop products in the way they
actually have over the past 30 years. It would have been too costly, and – most
likely – they would have to produce in ways that, compared with today, would
have made the quality of products substantially lower. It is often forgotten how
many markets in the pre-globalization era were dominated by expensive products
with low quality. And that did not happen by chance; it was rather the
consequence of narrow opportunities for business in how they could compete and
develop their offerings.
Workers have benefitted substantially from the way that globalization increased
the premium for scale and specialization. There is a general pattern in the world
economy that open economies are much better for workers than less open
economies (see Box 4). And the improvements made in open economies partly
comes from the fact that the new production they generate depends more on
human capital. Workers that have more and better education, and that is better at
delivering creative solutions to problems, have higher salaries and better
employment conditions.

Box 4: New Trade Opportunities Benefit Labour

Improving business opportunities benefit workers in the economy. Companies that can better use the
various gains from trade – for instance, scaling up and specializing the production – also create jobs
that demand higher skills and that are better paid. Moreover, these benefits tend to be stronger in
economies that are more open to trade and investment than others. The OECD, for instance, has
found that manufacturing workers in more open economies had between 1970 and 2000 raises in pay
that were between 3 and 9 times greater than those in more closer economies. In the United States,
for instance, exporting firms pay wages that are close to 10 percent higher than in non-exporting
firms.[15] For Chile, also a developed economy, the trade premium is even larger: a worker in a
sector substantially open to trade earns 25 percent more than a worker in average. In a review of
world-class research studies, the OECD found that they all concluded that trade drives up wages.
While outsourcing and off-shoring of intermediate production can lead to unemployment for
some, wages and aggregate employment are improved. One does not need a Nobel Prize in
economics to understand why. Trade improves the way that economies use their human resources.
When some parts of the production are off-shored, it means that companies can specialize and invest
more in human capital. A substantial part of globalization has therefore been to get labour to be
employed in their right places: the part of the workforce in advanced economies that is involved in
work with high value added increases constantly. Resources, then, have both been better allocated
and freed up for alternative uses. It is no surprise, therefore, that open economies outperform by far
other economies in labour rights and working conditions, including working time, fatal incidents, and
life expectancy.[16] New jobs created are not just better rewarded – they are safer and, often, more
stimulating.

Box 5: Globalization and Gender Equality

 
Gender equality has improved much over the past half century. While discrimination of women
remains a big problem in many countries, globalization has helped to create new economic
opportunity for women, reduce gender wage inequality, and generally put a higher cost on those that
discriminate in favour of men. Think of female entrepreneurs in poor regions that, for a variety of
reasons, have been locked out of the formal financial sector and not been able to access credit or
payment systems. Internet and mobile technology – developed in other parts of the world – now give
them the opportunity to access financial services and receive payments. For many of them, global
online platforms help to access new consumers that they previously could not reach. For instance,
while most people know that Alibaba is the biggest e-commerce platform in the world – its revenues
are bigger than the combined revenues of Amazon and eBay – few know that the secret to its
success has been to connect small entrepreneurs with new customers. Behind the Alibaba brand
hides B2B and B2C marketplaces for small producers (many of whom are women) that otherwise lack
the resources and scale to reach customers. Similar opportunities are also created by globalization in
advanced economies – and research also shows that the new competition that often follows on the
heels of trade helps to reduce gender wage inequality. Discrimination is costly because it means that
resources are used inefficiently and that firms are not using human capital in ways that make them
more competitive. When competition increases, it often gets more expensive for discriminating firms
to continue overpaying men and underpaying women, and that is why new import competition tends
to drive down the gender pay gap. One study that compared wages over time in US manufacturing
sectors found that gender wage discrimination was stronger in concentrated sectors (where a single
firm has stronger market power to set prices) than in competitive sectors. However, when
concentrated sectors experienced an increase in new trade competition, the gender pay gap was
reduced.[17]

http://www1.aucegypt.edu/src/globalization/labor_Market.htm

 
Main Sections
► What is the effect of globalization on the employment level?
▪ The importance in studying the effects of globalization on the labor market
How does globalization affect the labor
▪ market; Positive and Negative Effects
► Effect on real wage levels of work force
► More Resources
   

What is the effect of Globalization on the Employment level ?

The importance in studying the effects of globalization on the labor market
The importance in studying the effects of globalization on the labor market lies in the fact that
earnings from labor represent the main source of income for the great majority of the inhabitants of
developing nations and especially of the poorer groups of workers, who lack ownership of any other
material assets.
 
How does Globalization affect the labor market?

Positive Effects
►Positive effects can occur as a result of  the increased capacity of developing countries  to create
new opportunities for work and production following the alleviation of price distortions with respect
to both labor and capital. (ESCWA 1999:24).
►FDI has both direct and indirect effects on employment creation in the recipient countries. This
depends on the size and type of investment, the type of technology adopted and the ability of the
host country to master the imported technology and adapt it to its needs.

►FDI also has indirect effects on employment through the vertical links to the TNCs, and there may
also be spillover effects of TNCs on local science, technology, education and training

Negative Effects
► Negative effects occur as a result of large-scale technological developments that accompany

this phenomenon, which will reduce the demand on unskilled labor

Even direct foreign investment does not care for cheap workers but only for highly skilled
workers.
► The traditional nature of “work” might disappear due the rapid advances in technology, while

at the same time creating new and innovative occupations in favor of the highly specialized
professions.
► An increase in hidden unemployment, a lack of new job openings, and a deterioration of real
wage rates are the consequences of globalization in most developing economies, which were
unable to adapt the new technologies.
► Moreover if the labor clause, will be enforced through the WTO, this will have a negative
impact on economic growth and employment in many developing countries, where child labor
exists and where working conditions are miserable (Nassar,2003).
► Most trade liberalization benefits will be received by the manufacturing-producing countries,
while the smallest share will be going to the agricultural-producing countries (developing
countries).
► In addition policies of structural adjustment such as privatization imply an increase in
unemployment since privatization is accompanied usually by a reduction in the demand for
labor.
► Finally the theoretical predictions about the employment consequences of trade liberalization
are based on assumptions of full employment of resources and flexible labor markets. These
assumptions, might not hold true in developing countries where labor markets are inflexible
due to structural factors.
 
Labor supply trends by region,1980-2015
Working age Average Annual Labor Force Projected Annual Population Formal %
  (15-64) population Growth (%) Growth Rate (%), of Labor
( millions) (1980 – 1999) 1999-2015 Force

  1980 1999   0-14 15-64 65+ 1980 1999

East Asia &Pacific 820 1220 1.9 -0.6 1.2 2.5 42.5 44.4
Eastern Europe
274 318 0.5 -1.2 0.4 0.7 46.7 46.2
&Central Asia
Latin America &
201 319 2.7 -0.1 1.7 2.8 27.8 34.6
Caribbean
Middle East
92 172 3 0.5 2.5 2.8 23.8 27.3
&North Africa
South Asia 508 797 2.2 0.1 2 2.5 33.8 33.3
Sub-Saharan
195 340 2.6 1.6 2.7 1.8 42.3 42.2
Africa
High-income 505 595 1 -0.6 0.2 1.8 38.4 43.1
World 2595 3761 1.9 0.1 1.4 2.1 39.1 40.6

                 
 Source : Betcherman, G. (2002)
 
Educational Levels of Female Workers in The Manufacturing Sector in Selected in Selected
Arab Countries in 1980's and 1990's
University &
Country Year Illiterate Read &Write  Primary Intermediate Secondary Unidentified
Upper

                 
Bahrain 1991 1 4 8 11 64 12 -
Kuwait 1970 11 22 22 33 - 11 -
Oman 1993 42 22 17 8 10 1 0
Qatar 1986 2 6 7 15 28 42 -
Saudi Arabia 1986 34 13 26 7 15 5 -
United Arab
1980 45 - - 18 9 27 -
Emirates
1976 34 23 17 18 1 6 1
Egypt
1990 58 12 8 16 1 5 0
Iraq 1987 25 16 23 7 12 12 6
1979 13 19 37 18 8 5
Jordan -
1993 7 6 21 26 21 19
Lebanon 1997 9 6 36 27 13 9 19
1970 67 21 10 1 1 0 0
Syria
1994 21 24 31 13 9 2 0
Source : CAWTAR,2001
 
Educational Levels of Female Workers in The Services Sector  in Selected Arab Countries in
1980's and 1990's
University &
Country Year Illiterate  Primary Intermediate Secondary Unidentified
Upper
Bahrain 1991 46 15 10 8 0 0
Kuwait 1985 30 24 23 3 2 0
Qatar 1986 36 6 5 8 3 0
Saudi Arabia 1987 79 11 1 2 1 0
United Arab Emirates 1980 83 3 2 3 0 0
Egypt 1986 65 5 4 0 4 0
Iraq 1987 52 17 4 2 2 0
Jordan 1979 48 18 13 4 3 7
Syria 1994 27 33 12 4 1 0
Yemen 1991 79 4 0 0 0 0
Source: CAWTAR,2001

Effect on real wage levels of the work force

► Trade flows lead to shifts in the demand for labor, as more workers are needed in newly

profitable sectors and fewer in unprofitable sectors.

► If the supply of labor is fixed these demand changes lead to a rise in wages to more profitable
industries.
► Competition by imports might lower the price of products by low skilled labor relative to the
price of products made by skilled labor, so that domestic firms shift toward producing skill
intensive goods, which will lead to a lower real wage level for the majority of work force, the
unskilled in developing countries (Rama,M.2003 , Fontana, M.1998)
► Financial liberalization is likely to result in a fall in the net income received by workers. This is
because countries are lowering taxes to attract FDI, relatively to high tax rates on labor, as
labor is less mobile to resist high taxes

By applying this discriminatory tax policy against labor, income will be redistributed in favor of the
high-income earners in the society. This negative impact of globalization on wages is likely to be
greater in developing countries, which lack strong labor unions and democratic political systems
such as developing countries (ABDEL-KHALEK, G. and Karima Korayem.1999)