Paris: Globalisation is good, but people are earning less of the wealth generated by economic growth and integration as the decades go by, the Organisation for Economic Co-operation and Development (OECD) said on 19 June.
In a report on jobs policies, the OECD remained faithful to its mandate as a promoter of free markets, trade and investment, but said it was time for a reality check on globalisation’s darker side too.
“Millions are benefiting from globalisation but at the same time there’s a feeling something’s wrong with the process,” OECD Secretary General Angel Gurria told a news conference.
Governments needed to address public concern over jobs and pay in a world being transformed at unprecedented speed by technology, cheap transport and communications, and the rise of China, Russia, India and Brazil with vast pools of cheap labour.
“It’s still a win-win process for all countries,” Raymond Torres, the report’s main author, told Reuters in an interview.
“But just because markets are good for growth, not wanting to see these vulnerabilities would be counter-productive.”
The share of wages in national income fell in most OECD countries in the past few decades, said the report from the Paris-based organisation, whose 30 members are mostly wealthy, industrialised economies.
“It’s quite remarkable.” Torres said.
Japanese wages have fallen by around 25% as a share of GDP in the past 30 years, while they have dropped by around 13% in the 15 wealthier European Union member countries, and by 7% in the United States, the OECD report showed.
The report also said the divide between high-earners and those at the bottom end of the scale had widened, and feelings of job insecurity had grown more acute, a factor which probably explained low wage growth, in part at least.
Offshoring, where companies reallocate various parts of the production process or services to cheaper places, was not as big a job-killer in OECD countries as believed, but the impression was enough to fuel insecurity, Torres and Gurria said.
The pool of cheap labour has surged since China opened its doors to the world and workers compete on an increasingly global scale because cheaper technology, transport and telecoms make it easier for firms to organise on an international scale.
China, India, Brazil and Russia account for 45% of the world labour supply today, compared to 19 percent for the whole OECD, which spans the United States, Japan and much of Europe.
The OECD urged governments to resist protectionist reponses and instead adapt employment policies to help people move from one job to another with greater ease and sense of security.
Gurria acknowledged that some people had lost out, but this was something policies should tackle because globalisation was a positive and in any case inevitable process. “It’s how you make the best out of it,” he said. “We have to convince people.”
That implied changes.
“The ‘job for life’ is dead,” Torres said. “In order to reap the benefits of globsalisation you have to move. Enterprises have to move into new areas, new niches, and people have to move into new enterprises.”
“The thing now is to protect people, but not protect jobs, because some jobs have no future,” he said.
On that front, Denmark, with an unemployment rate of 3.9% in 2006, was doing well, he said. It has generous state aid for job-seekers, good training and job-search programmes, combined with relatively light and cheap dismissal procedures.
Moving with the times, Austria adopted a “portable” system for severance payments since 2003, he noted. Employers put 1.5% of pay into a severance fund for every employee which they can cash in if they leave or take with them to a new job. That made changing jobs easier, Torres said.