The spread of globalization accelerates free movement of goods and services between different nations across the globe
The spread of globalization accelerates free movement of goods and services between different nations across the globe. Globalization has undoubtedly results in an increased average income for countries. The increased average income however has achieved at the cost of increased inequality in the distribution of income (Baldwin, 2016)Income has increased within the nation because of increasing openness and so is the income inequality.
There are two existing views in favor of increased inequality resulted from globalization. One view is less- worse than other. In the less-worse version, inequality is seen as an obvious side effect of economic prosperity within the nation. In the process of globalization, wage in one group of labor increase but the same does not happen to other group. Consequently, income gap increases result in an increasing inequality.
The worse version points out that because of globalization demand for one group especially for the low skilled workers reduces (Iyall Smith, 2013) On the other hand, specialization and trade increase demand and wage of high skilled labors. The worse version is of more concerning.
The extent of inequality however depends on how the available skills match with changing need of production. Better the skill matching lesser is the inequality. The equality also differs across the countries depending on skills of the existing workers. Globalization reduces bargaining power of the low skilled workers which further aggravates inequality (Steger, 2017)High skilled workers because of increasing international demand enjoy a higher wage. The benefits of globalization thus come at the cost of lower income for some segment of workers.