Martin Wolf is worried that if we don't do a better job of protecting workers displaced by globalization and of sharing the gains from globalization more broadly, the global trading system will fail to live up to its potential:
How to promote employment while protecting the low-paid, by Martin Wolf, Commentary, Financial Times: There are two particularly significant facts about labour markets of the high-income countries over the past two to three decades: globalisation and declining shares of labour income in gross domestic product.
How are these phenomena related? What are the policy implications? The answers to these questions may well determine whether the backlash against globalisation...
The subject is the focus of a background chapter to the latest World Economic Outlook from the International Monetary Fund. It reaches four chief conclusions.
First, the globally engaged labour force has quadrupled over the past two decades, with the greatest impact coming from trade, not immigration.
Second, the shares of labour income in GDP have declined markedly across the high-income countries over this period.
Third, globalisation is among the causes of the declining share of labour income in GDP. But technology has been more important.
Finally, countries that have lowered the cost of labour to business and improved labour-market flexibility have generally experienced smaller declines in labour-income shares. ...
[W]hat are the policy conclusions? The ... most striking conclusion of this analysis has been the benefits of policies that promote employment. Insisting on high real wages for what, in consequence, become non-existent jobs is counter-productive. While incomes can be sustained through transfers, subsidised idleness is soul- destroying. French voters, please note.
The right policy, then, is to promote employment while augmenting the incomes of the low-paid or at least sharply reducing the taxation of labour. It is also to promote the highest quality of basic education across the labour force and provide good opportunities for motivated workers to upgrade their skills.
The right policy is to combine openness to trade with a politically acceptable sharing of the gains in high-income countries. The challenge is huge. But it is one at which we cannot afford to fail.