How does an increase in global trade affect unemployment?

Factor endowments determine the pattern of comparative advantage. In a country relatively abundant in skilled labor, international trade increases the relative price of labour-intensive products. This reduces the unemployment rate for skilled workers and increases the unemployment rate for unskilled workers. On the other hand, there are economists, policy makers and experts who argue that trade is good for the economy, that the general public is simply wrong about its benefits, and that politicians who sympathize with those who care about globalization are pandering to special interests at the expense of the overall economy.

Previous research was motivated by research on the impact of international trade on relative wages. We present detailed summary statistics of the underlying data in the “The Data” section, and then we perform regressions of the change in the individual employment situation based on the characteristics of people and business variables in the “Changes in the employment situation, individual characteristics and profession” section. Krugman's (2000) criticism that a country's trade volume is often too small to explain the effects on different types of labor hardly applies in this case (or at least to a much lesser extent). Lower interest rates stimulate employment growth in interest-sensitive industries (such as housing) and may offset some of the job losses caused by trade.

However, this increase in average wages can include both gains for workers in certain jobs and industries and losses for others. The Institute for Economic Policy and other researchers have examined the impacts of trade on employment in recent years by comparing job opportunities lost due to imports with those obtained through exports. As international trade increases, it helps jobs move from industries in which that economy does not have a comparative advantage to industries where it does have a comparative advantage. Trade, which is intra-industrial and is carried out with other high-income countries that have similar labor standards to those of the United States, but which, nonetheless, is important from a moral and economic point of view.

Given the firm, albeit uninterrupted, trend in the relative unemployment rate in Switzerland, it is extremely interesting to assess whether trade can be a driving force behind these developments. In addition, Feenstra and Hanson (200) argue that the effects of trade in intermediate inputs may be similar to those caused by a technological change biased in skills, which is often responsible for the wage gap in the US economy. Fundamentally, this wage loss is not limited only to workers in sectors exposed to trade, but is suffered by all workers who resemble those displaced by imports in terms of education, skills and experience. The absolute figures from the OECD data indicate that the Swiss UL increased from 1.2% (199) to 8.8% (201), while the UH increased to a much smaller extent during this period (from 1.3 to 3.2%).

In addition, the status quo of globalization is at least as stingy for America's poor trading partners as it is for American workers. This debate must include responses to globalization that are commensurate with economic insecurity, wage losses and the redistribution it leaves in its wake.