Consequences of Trade for Labor Markets and the Employment Relationship
Author(s)
Rodrik, Dani
Abstract
Since the second half of the 1970s the United States and Western Europe have experienced a widening wage premium for skills and a significant increase in labor market instability and insecurity. This article examines the impacts of globalization upon workers (especially low-skilled workers) in the North. It focuses on how trade affects the relative demands for skilled and unskilled workers, increasing the ease with which domestic producers can be substituted across national borders through outsourcing or foreign direct investment. One result is an inward shift and a flattening of the demand curves for low-skilled workers, reducing their average wages while increasing the volatility of their wages and hours worked. Another result is increased inequality in earnings within skill-groups.
