Emerging Dimensions of a New World of Work

Emerging Dimensions of a New World of Work:

Towards a Better Utilization of Human Resources in Asia

Emerging Dimensions of a New World of Work:

Towards a Better Utilization of Human Resources in Asia

Yasuo Kuwahara

Dokkyo University, Japan

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Abstract

Globalization is transforming the world of work beyond our imagination. This paper overviews major changes in the nature of work produced by globalization. Among various factors that drive globalization, the importance of population and information technology (IT) is noteworthy.

The world faces a stage of population increase toward the mid-21st century. Developed countries have to cope with the ageing due to the decrease of birth rate, while developing countries have to solve the population increase beyond their capacity in employment, education, and others. Migration has emerged as a means to cope with the problems of both sides.

A general equilibrium trade model tells that a significant downward trend of wages works in the global labor pool, associated with the increase of world population, mostly in developing countries in Asia and Africa. The emergence of Chinese and Indian economies with their huge population and competitive labor cost has already given a great impact on the nature of work in the global context.

The development of information technology (IT), above all, internet technology has made it possible to transfer jobs instantly from one area of the globe to the other. Major characteristics of these on-line technical work are; 1) just-in-time labor, 2) high-earning but low-cost, and 3) universal and systematic. These changes transform the world of traditional work, while generating new modes of work.

A new advantage for Asian countries is the combination of advanced technologies, e.g. Information Technology (IT) and population with competitively qualified workforce. IT is a great means for the development of Asian countries that have difficulties for the takeoff.

The emergence of on-line migration will definitely change the nature of traditional (physical) migration. Adverse results, associated with traditional migration, e.g., trafficking, discrimination, long-term settlement, and family Diaspora would be mitigated. A new world of work, i.e., GSW (Global Software Work) is emerging. However, demand for unskilled jobs remains for the foreseeable future. These changes necessitate reexamining frames for labor standards and international competitiveness.

Keywords：Globalization, population, migration, information technology (IT), internet,

ageing, outsourcing, off-shoring, job creation, job destruction, Global Software Work (GSW), robots, trade union, employee involvement, labor standards

I. Globalization and its Impact

The main purpose of this paper is to give an overview on the emerging new world of work placing an emphasis on the aspects generated by population/migration and information technology. This paper singled out these two factors to show the contours of new world of work. Based on this observation, the final part of the paper, i.e., overview, shows policy implications.

When an economy embarks on its globalization path, its comparative advantage and pattern of trade undergo a transformation. The progress of globalization is changing our world at a great speed. Although the definitions of globalization are many, let me start from a general concept including the economy, the polity and the culture. Globalization is the process of increasing integration between world civilizations. In addition, it is a social process in which the constraints of geography on social and cultural arrangements recede and in which the people become increasingly aware that these constraints are receding.

Since it is not possible here to examine the totality of the impact of globalization on society as a whole, this paper examines major economic impacts of globalization for the world of work.. More comprehensive treatment of the issue may be found in other works (e.g., Friedman 1999; Laviec, Horiuchi and Sugeno, 2004).

Globalization has brought about some industries or countries prosperity, while driving others to decline. Many factors have worked to bring about these changes. Above all, population increase and information (or internet) technology (IT) have exerted their decisive influences.

Various discrepancies have emerged in this process. One serious aspect is the “digital divide” and widening income differences among people in the same country or between countries. Some people can adapt to the rapid development of new information technologies, while others can’t. People are often segregated from the access to possibilities because of poverty and other reasons.

Some countries have experienced the widening gap of incomes among social strata. In a few Asian developing countries (e.g., India and China), increased trade, FDI (Foreign Direct Investment) and off-shoring generated new jobs, while migration brought about various changes via increased flow of skill and remittance. However, globalization has highlighted the difference of successors and losers. While many riches were born utilizing their abilities and chances, many found difficulties in catching up with the speed of changes.

According to Thomas Friedman, author of The Lexus and the Olive Tree, a world bestseller published in 1999, globalization means ”the spread of free-market capitalism to virtually every country in the world” (Friedman 1999, 9). Even if this is true, there are many actors in the world who can exert influences over the direction and character of globalization. They are multinational companies, workers, governments, NGOs, NPOs and other citizen groups. The French and Dutch national referendums on the European Union’s constitution in May and June in 2005 showed the strength of people who were against the rapid tide of globalization. Many of these people had difficulties in catching up with the speed of the EU expansion.

In developed countries the world of work has changed dramatically in the past two or three decades particularly accelerated by information technologies, in the ways that have got rid of some of its more disagreeable sides, and made what is left more interesting. However, information technologies should not be taken as the cause of only good effects. Others – on privacy, on managerial time, and on the complexity of decision-making, for example – bring at least as many difficulties as benefits.

Along with the information technologies, the global increase of population in the world has produced various difficulties. These difficulties include issues concerning migration, ageing population, and imbalance of supply and demand of labor.

II. “Population Explosion” and International Migration

Population Trend Behind the Migration Increase

A factor that accelerates the globalization is the increase of population. World population is currently growing at an annual rate of 1.2 per cent, implying a net addition of 77 million people per year. The 2002 revision of the UN population division projects the world population at 8.9 billion in the year 2050 as the medium variant. Today, the population of more developed regions of the world is rising at an annual rate of 0.25 per cent, while that of the less developed regions (mostly African and Asian countries) is increasing nearly six times as fast, at 1.46 per cent. In other words, the population of less developed regions is projected to rise from 4.9 billion in 2000 to 7.7 billion in 2050 in the total of 8.9 billion.

International migration is one of the major dimensions of globalization. It increased markedly over the last decades of the twentieth century, particularly after 1970. The number of international migrants in the world had risen from 76 million in 1960 to 82 million in 1970, reached 100 million in 1980 and increased to 154 million in 1990. By 2000, an estimated 175 million persons were living outside their country of birth. Of these, about 158 million were deemed international migrants; approximately 16 million were recognized refugees fleeting out of a well-founded fear of persecution; and 900,000 were asylum-seekers (UN 2004, vii).

An interesting relation exists between population, incomes and migration in the Asian region. I have classified major Asian countries by the size of population and level of incomes, in other words, GDP per capita. With the economic development, a few countries shift from labor-sending countries to labor-receiving countries. This process is quite dynamic. In the past two decades, Republic of Korea, Malaysia, and Thailand shifted from labor-sending countries to net labor receiving countries.

Japan had sent emigrants to Brazil, Peru, and other Latin American countries until early 1970s. The last immigrant vessel arrived at Santos, Brazil in March 1973. Since the latter-half of the 1980s, the second, and third generations of the Japanese descendants in these countries have come to Japan looking for jobs. Japan has shifted to a receiving country of immigrants since the mid-1980s.

Globalization is most remarkably transforming the Asian world just like a tidal wave. In its process, various resources are mobile from one country to another. These resources include capital, labor, technologies, and knowledge. One of the driving forces of globalization in Asia is its relatively low labor cost associated with huge population. This relationship among Asian countries tells many things.

Suppose that the world population is fully mobile over national borders without constraints, where will the wages convert? What will be the wage rate in equilibrium supposing that other conditions are equal? Needless to say, this is a hypothetical question (Leamer 1995).

It is remarkable that the weight of population is so heavy among several Asian countries such as China, India, Pakistan, Bangladesh and Indonesia. If people of the world are mobile or fluid just like water, we’ll easily see what will be the result. Developed countries with small population but high wages have large impact, e.g., substantial decreases of wages, while developing countries with large population enjoy small wage increases.

It is no surprise that many developed countries now see trade with the new, low-cost producers as both quantitatively important and potentially highly destructive of employment prospects at home. These alarmist views argue that with today’s high capital mobility the destructive features could manifest themselves quickly.

However, there are a number of reasons why the ominously suggestive nature of this challenge of global equalization of wages should not be taken at face value in the real world. Although the weight of large population with low wages is significant, the tendency for factor prices, in particular wages, to become equalized internationally is subject to a number of qualifications. National borders stand against the free flow of resources from one country to another. Other reasons are:

(1) Labor is not homogeneous; better qualifications command a return to the human

capital accumulated which protects many workers in traditional industrial countries from a leveling down of their pay.

(2) Protection against this trend is also offered by the way in which capital is used

within the firm and in the country in which it operates. Better physical infrastructure, including communications and easy access to R&D, can keep up higher rewards to other factors of production.

(3) To the extent that traditional industrial countries and their new trading partners have

specialized fully in the production of different goods there is no further pressure for reducing wages in the former.

(4) When the new economies enter the global trading system, wages in their

internationally active sectors are likely to be bid up rapidly.

(5) Trade flows with new, low-cost producers are likely to remain both modest for a

long time relative to the size of the Trilateral economies and balanced, since the newcomers are likely to use all their export earnings to purchase goods and services in the developed area.

Changes in the Long-Run

We also have to examine the other side. Despite these qualifications on the equalization of factor prices, various pressures toward an equilibrium work in the long run. A typical example is the recent safeguard invocation over textile products in the United States and EU. China has emerged as the major exporter based on the relatively low labor cost and the latest technology. The closure of quota as of January 1st 2005 has brought about the expected increase of Chinese products in the world market. If wages in the developed countries are rigid and technology is similar, imports from China inevitably increase. Otherwise, the textile firms in the US or EU would close down or move to China and other developing countries to utilize the advantage of lower cost.

Many countries maintain their own immigration control systems. Just like the reverse of the water flow, immigrants move from low-wage countries to high-wage countries, high-income countries, if no barriers exist among countries that limit the free movement of people. In actual world, every country operates a system of immigration control, which works like a control valve of water pipes. Labor-receiving countries, usually developed countries, maintain a tight regulation against the free inflow of immigrants. The recent threat of terrorism has made the immigration control quite strict.

Developed countries have some similarities with regard to their immigration policies. For the unskilled migrants, they are not willing to open doors. As a result, many immigrants in this category are regarded as the illegal foreign workers who are overstaying. On the other hand, developed countries have opened doors more generously to the high-skilled manpower. These workers are often short in supply both in developed and developing countries.

With regard to the semi-skilled workers, the immigration policy of developed countries is ambiguous. Developed countries operate more or less selective measures in choosing immigrants.

The flow of migration is sometimes blocked or stopped by political and other unexpected factors. The recent terrorists’ actions are an unfortunate example. Many countries have tightened the control of immigration.

III. Towards a Knowledge-Based Society

It is widely argued that economic competitiveness in global market greatly rests on the knowledge and skills of the workforce. Such ideas have led developed countries to find ways of upgrading the skills of the many rather than limiting the opportunity for high-skilled work to an elite of executives, manages and professionals. The rapid development of information technology, often called IT revolution developed since the early 1990's has made this direction distinct. The information technology is a great stepping-stone for further economic development.

Reflecting the relative shortage of high-skilled manpower, access to the global pool of high-tech workers has started. A "global scramble for talent" has emerged, accelerated by the government policies and industry's strategies in both labor-sending and labor-receiving countries. Some countries have provided more favorable status for foreigners and some have been encouraging national experts abroad to return.