OECD Downplays Impact Of Globalization But Reports Job Outlook Slow

Employment prospects are projected to show scant improvement this year and next in the world's leading industrialized states, where economic momentum will likely be hampered by high oil prices, the Organization for Economic Cooperation and Development (OECD) warned June 28. In its latest assessment of world labor trends, the OECD also challenged the argument that globalization -- the freer flow of trade and investment across national borders -- has contributed to widespread job losses in high-wage countries.

But the OECD acknowledged that globalization has contributed to losses in some sectors and urged governments to adopt policies cushioning the shock of unemployment in order to prevent a backlash against open trade.

With overall growth dragged down by rising oil rates and exchange rate volatility, notably in the eurozone, "the OECD employment picture is expected to improve only slowly in 2005-2006", the report said, adding that wage increases would be "moderate". In the 30 OECD members employment growth is projected to come to only 1.1% in 2004 and 2005 before edging up to 1.3% in 2006.

Unemployment rates are expected to decline "only slowly" in 2005-2006 to 6.4% of the work force next year after 6.7% in 2004 and 2005. The OECD devoted considerable space to an assessment of globalization on the world labor market and in particular to "delocalization", the transfer of jobs from high-wage to low-wage countries. Although it may seem that workers in high-wage countries could not compete with those in fast-developing emerging market countries, the OECD said, "aggregate employment performance does not appear to have suffered in the OECD countries that are most open to trade or where trade openness has increased most rapidly". It cited research in 15 countries in 2000 showing that although employment had fallen more rapidly in industries heavily exposed to international competition, those industries accounted for less than 4% of total employment.

But it also recognized that globalization was not painless, notably as workers displaced by trade tended to be older, less educated and have skills associated with declining industrial sectors. As a result, it said, governments should implement a mix of programs providing income support in the event of job loss, as well as counseling, training and other re-employment assistance.