Trade-adjustment Costs in OECD Labour Markets: A Mountain or a Molehill?

Concerns that international trade and investment represent a growing threat to workers in OECD countries currently run very high. How many workers are losing their jobs as a result of rising imports or the " delocalisation " of jobs? Are trade-displaced workers able to move into new jobs which offer pay comparable to that on the jobs lost to international competition, or are these layoffs a pathway to long-term unemployment and chronic under-employment? How can governments best assist workers displaced by trade to re-integrate into the labour market? For example, should these workers be retrained for jobs in more dynamic industries? If the only jobs available to some job losers pay much less than their prior jobs, should a wage insurance scheme be set up to compensate them for a part of their lost earnings power? Fears that " globalisation " implies increasing job losses and downward pressure on wages appear to be widespread and are an important source of popular ambivalence towards the increasingly open character of OECD economies. Such concerns are not new since international economic integration has proceeded at a rapid pace in recent decades: the volume of world trade growing sixteen fold over the second half of the twentieth century, while annual outflows of foreign direct investment were 25 times higher in the appear to have heightened workers' fears that rising trade competition threatens their jobs and past gains in wages and employment conditions, particularly in the OECD countries where wages are highest Increased international sourcing of production activities – including the " offshoring " of white-collar jobs in information technology (IT) and business process services – has led some commentators to conclude that a large share of high-wage workers will soon be in direct competition with workers in countries where wages are far lower. Anxieties about " delocalisation " and " a race to the bottom " are also reinforced by the increasing integration of India and China into the world trading system. Finally, the proposals for further trade and investment liberalisation associated with ongoing WTO negotiations and the Doha Development Agenda also appear to portend intensified international competition for OECD workers. In light of these concerns, it is timely to review the impact of rising international economic integration on OECD labour markets, as well as what is known about best-practice policy responses. However, it is important to place such a review within its broader …