Trade, Jobs and Wages

Trade, Jobs and Wages

Hian Teck Hoon

The world’s increasing integration through trade and the persistence of high unemployment in Europe, and other areas of the world, highlight the need to understand the implications of free trade for unemployment. Trade, Jobs and Wages analyses how employment levels and real wages are affected by international trade. Popular trade theory disregards the impact of free trade on the rate of unemployment, since it assumes full employment at the outset. By focusing on the determinants of the natural rate of unemployment, Professor Hoon places an emphasis on real, as opposed to monetary, factors in accounting for long term trends in wages and unemployment.

Chapter 1: Introduction

Hian Teck Hoon

Subjects: business and management, international business, economics and finance, international economics, labour economics

Extract

WHY WORK? Work is central to one’s life. Through work, one earns a living wage to support a certain lifestyle and, for many, a family as well. It is true that one can tide over a period of unemployment through various means in order to maintain some semblance of a normal quality of life: by drawing down on current assets – the result of accumulation of past savings; by turning to the state for financial support if welfare payments are made in the event of job loss; or by turning to friends, relatives and other community support systems. But that period of unemployment cannot be prolonged. When joblessness becomes a long-term experience, economic hardship generally sets in unless the welfare system provides a cushion indefinitely. So, generally, one needs to hold a job in order to sustain a certain type of consumption activity and to enjoy a circle of social relationships. But work does not bring only pecuniary rewards. There are many nonpecuniary rewards as well. One’s self-esteem, for example, tends to be very much tied up with one’s ability to tackle the challenges that the workplace throws up. There is a sense of accomplishment that comes from being able to size up a problem and to marshall the available resources to solve the problem. When one’s contribution to solving a problem at work is acknowledged, even if only tacitly, it boosts self-confidence and encourages greater initiative. Even when a particular kind of job is mundane, the worker feels...