Globalisation and workers in developing countries

Abstract

Stories of the positive and negative effects of globalisation on workers in developing countries abound. However, a comprehensive picture is missing and many of the stories are ideologically charged. This paper reviews the academic literature on the subject, including several studies currently underway, and derives the implications for public policy. Firstly, it deals with the effects of openness to trade, foreign direct investment and financial crises on average wages. Secondly, it discusses the impact of exposure to world markets on the dispersion of wages by occupation, skill and gender. Thirdly, it describes the pattern of job destruction and job creation associated with globalisation. Since these two processes are not synchronised, the fourth issue addressed is the impact on unemployment rates. Fifthly, the paper reviews the labour market policies that can be used to offset the adverse impacts of globalisation on employment and labour earnings. Finally, it discusses how the international community could encourage developing countries to adopt sound labour market policies in the context of globalisation.