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February 19, 2009

Globalization versus productivity

There's no question that globalization has changed our economy. Many argue the movement to a world economy is responsible for a great deal of job loss in our country and state, especially in manufacturing. But is there a competing explanation? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"There's no question - absolutely no question - globalization has increased the ability of some businesses to access lower-cost foreign labor. We've seen that, for example, with our textile apparel industry. And you can certainly attribute a large number of job losses, particularly here in North Carolina, to globalization. Now quickly, the other side of the coin is that if those products made in foreign countries are cheaper, then consumers benefit, but that's another issue. However, there is a competing view on what is the cause of job losses, particularly in manufacturing, and that is that many manufacturing jobs have been lost - and, in fact, many manufacturing jobs were being lost even before globalization - due to improvement in productivity. Manufacturing workers, because they are now trained better, they're working with better machinery, better technology, and simply produce more per hour, they're more productive. And therefore, you have a factory that's producing 1,000 widgets, and 10 years ago they needed 100 people, maybe today they only need 10 people to produce those 1,000 widgets. In fact, studies that have tried to sort out how many jobs have been lost to globalization, how many jobs - particularly manufacturing - have been lost to improvements in productivity say it's about 50-50. Half the job losses have been due to globalization; half the job losses have been due to improved productivity."

Posted by Dave at February 19, 2009 08:00 AM