Globalisation and its effects on employment

Globalisation, that concept so often repeated in recent decades and which brings with it the internationalisation of markets, the relocation of companies, the exchange of goods and services worldwide, the appearance of emerging countries and the competition between these and the already developed countries of the West, has consequences in different areas such as the environment, the economy, technological development and employment. This last point is the focus of this entry.

One of the most remarkable effects of globalisation is companies’ relocation from developed countries (mainly the USA and Europe) to developing or emerging countries (China, Brazil, India, etc.).

The internationalisation of markets has led large companies to seek new destinations to lower their costs and be more competitive in world markets. It has been a boost to industrialise their economies for emerging countries and open them to the world. Thus, in the beginning, this situation was favourable for developed countries. They have taken advantage of the underdeveloped countries’ lack of capacity to exploit their natural resources and poor labour legislation to manufacture low-cost products in the underdeveloped countries and then sell them on Western and world markets, thus making a large profit. Gradually, emerging countries have become more industrialised and autonomous, exploiting their resources and opening up to the global market. This development has generated more competition at the global level, taking power away from Western countries.

In the early days of globalisation, emerging countries were not in direct competition with Western countries because they offered different products and services. While countries such as China focused on exporting textiles and commodities, Europe and the US, among others, remained the exporters of technology in all areas. Today, these differences have blurred, and the emerging countries now occupy all spheres of production. In this context, there is a clear disadvantage between the two blocs.

In terms of the effects of this phenomenon on labour relations, it would be good to distinguish between what is happening in both. On the one hand, in developing countries, the scarce labour legislation encourages precarious employment typical of 19th-century industrialisation in Europe, with low wages, long working hours, child labour, lack of social and economic rights and health and safety work. In contrast, the West’s most immediate effect is the loss of labour supply due to corporate relocation. This decline in the supply of jobs in good times was not a problem because unemployment levels were not a cause for concern. With the global crisis and the high level of unemployment in the West, it is already a problem. In a context of a globalised market and free competition between countries, the West is currently in a weak position, as it is challenging to compete against these countries due to their characteristics: lower standard of living, cheaper labour, more significant natural resources, more precarious work culture and less sensitive to social rights, among others.

How can this problem be solved?

1. In the first place, since markets are internationalised, everyday basic labour legislation should be established in which minimum standards of labour quality are established where workers’ rights are respected.
2. Strengthen micro, small and medium-sized enterprises to create a more stable economy, as they would be the economic base of each country, given that relocation is the product of large companies.
3. Encourage the development of innovation projects and create new products that can generate distinction and competition in the market.

Logically, it seems that the only way out for Europe is to a lesser extent to support companies working within Europe, as small companies contribute less to globalisation and invest more in R&D. The key to being competitive is to innovate. It would be absurd to compete with emerging countries on price, let alone demand labour legislation that negatively affects their growth.