Global Economic Integration and the Labor Market

The past two decades have seen an increased global integration of labor markets to a degree unprecedented in recent history despite continued barriers to labor mobility, particularly for low-skilled and unskilled workers. This has been driven by a rapid opening to and expansion of international trade and capital flows, and a growing spread of global production networks, outsourcing and offshoring. The total number of workers producing for international markets in goods alone rose from around 300 million in 1980 to almost 800 million at the turn of the millennium. This has been associated with a significant increase in the share of developing countries in world trade in manufactures. Accordingly, about 90 percent of the labor participating in world trade is now low-skilled and unskilled (Akyüz 2003, 100–101). Integration of labor markets has also been reinforced by increased trade in services, traditionally seen as nontraded activities, particularly through expansion of cross-border supply of certain services from the territory of one country to the territory of another, and consumption and commercial presence abroad. Services trade has expanded not only in low-skill, low-value-added activities such as call centers or transaction processing, but also in high-value-added sectors that involve skilled labor, notably in information technology, finance and health. Developing countries have become suppliers of some of these services, including in high-value added sectors.