1

Arnold McFather
Labor Econ Lit Review
5/2/15

Thesis Statement: Does globalization have an effect on local labor markets, and what
effect does it have employment levels?
Introduction: Lead with thesis statement
I.
Introduce the issue of Globalization
A. Definitions/Leading Factors
B. How Firms Have Reacted
II.
Strand Two:Effects of Globalization on Labor Markets
A. Positive Effects
1. Reduced Prices
a) Goods are Produced Cheaper
2. International Employment Increases
3. Easier Access to Goods
B. Negative Effects
1. Reduced Demand for Local Labor
a) Cheaper Wages Abroad
b) Scalable Production
c) Worker Migration
III.
Conclusion
A. What are the Effects
1. How Strong Are The Effects
2. Are They More Visible in Certain Sectors

Globalization has a negative effect on local labor markets with additional large
negative effects on the local employment because it lowers prices and reduces local
competition. In this paper I will examine the current economics standpoint regarding
globalization and how scholars have interpreted the results of their research. One such
area of examination will be on the data sources and how they represent the sample that
the researchers were looking into. The second area of examination are the effects of
globalization on labor markets based on the contrasting positive and negative
viewpoints given by the authors. As collectively defined, globalization is the tendency of
corporations to spread out across the world, with additional economic
interconnectedness of different geographic entities through the purchase of raw
materials, international manufacturing, and the sale of goods across borders. As the
21st century has progressed, firms have found it paramount to protect the interests of
their shareholders and monetary stability. This has led to the offshoring and outsourcing
that will be discussed more deeply in later stages of this paper. But firms have focused
on finding more accessible labor with cheaper costs and less overhead when they can
contract manufacturing to interior companies just as Nike does with their sneaker
production. Globalization debates often focus on two types of worker, the production
worker and the nonproduction worker. The production work is actively involved in the
manufacture of the goods the firm is selling. A nonproduction worker is one that is
removed from that process and participates in another capacity of the business
production cycle.
Positive General Effects
In each some articles that was examined, a common thread throughout were the
overall positive effects of globalization. It was found in several cases that globalization
had a minimal effect on the labor markets of local countries when compared to the
pre-globalization level. When the effect is considered to be positive, it helps the global
community in some way, be it access to a good or offsetting employment. But, it does
also have a minor effect on the labor market in some way. In my research, it has been
found that when firms make the decision to participate in offshoring and outsourcing, the
effect that people claim to exist is over dramatized. In an analysis of firms that utilize
offshoring, it was found that the effects on wages and employment levels for local labor
markets fluctuate very minimally with the addition of employees abroad. In some cases
it was found that there was only a one percentage point change in local employee
wages when offshore employment rose by ten percent (Ebenstein et al. 2014). This
finding gives us evidence that the effect could be positive compared to the original
hypothesis that it was a negative effect.

Negative Effects Based on Geography

When examining the negative effects of globalization, a large portion of the
articles that discuss the labor effects found globalization to have an effect
geographically. Throughout the end of the twentieth and the start of the twenty first
centuries, our trade with China has grown magnitudes by some estimates, a 1,000%
jump. In the period between 1977 and 1997 manufacturing firms in the United States
were exposed to Chinese firms who could provide a cheaper product often much faster
than local production. When examining the geographic This exposure led industries with
the most vulnerable markets to face a choice in competition, lower prices or die (Autor,
Dorn, Hanson 2013). Consequently, this effect has parlayed itself further into
international trade through the ratification of NAFTA in 1994. This agreement connected
Mexico, Canada, and the United States through mutual most favored nation statuses.
As a result of its status as a first world nation, Canada did not find the need for much
from the United States in terms of labor supply. But Mexico, as a lesser developed
nation, looked to its northern neighbor as an opportunity for positive growth. Much of the
southwestern United States can be considered an industrially vulnerable area where
manufacturing, agriculture, and routine1 jobs are most prevalent.
As a result of the geographic vulnerabilities and the removal of protections
around certain industries, left open to an increased labor supply in unskilled areas which
flattened out the wage growth curve for less educated people. An analysis found that
these effects were isolated to blue collar workers with college educated people finding a
far smaller impact on their jobs. Additionally, migration became an issue as access was
opened, people would move to the higher wage areas to make more money but the
local employees (mainly at the blue collar level) would depart the area to find work
elsewhere (McLaren, Shushanik 2010). Geographically, the ease of moving from
Mexico to the United States was significantly easier than crossing through the country to
move to Canada. As a result, the United States embraced more change than its
northern neighbor and its industries bore a more heavy brunt. Additionally, the ease of
migration has continued to cause strife between groups within the United States which
has notably reached a head in the 2016 election cycle. Dependent on the outcome of
the 2016 Presidential election, we could see significant changes to the flow of labor
migration in North America.

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