3.4 Understanding work in the national and global economy

Effects of Globalisation on the UK labour market

• Workers are becoming internationally mobile and increasingly are moving between countries to find work.

• Citizens of the European Union (EU) have the freedom to work in any EU country.

• Firms are increasingly choosing to locate their factories abroad to take advantage of lower labour costs and production costs.

Advantages to firms operating overseas Disadvantages of firms operating overseas

• Lower operating and labour costs• Firms have increased competitiveness• Exchange rates – IF the exchange rate falls, it lowers export prices• Firms are nearer to markets and/or sources of materials – reducing transport and distribution costs

•Jobs are lost in the UK• Difficulty in controlling operations• Unfamiliar cultures and languages• Transport costs to home markets – can vary with the oil price• Exchange rate changes – changes can go against you, making trading more expensive and reducing profits from overseas factories.

Foreign Direct Investment (FDI)• When a business from one country builds a factory in another• The UK is one of the top economies in the world for foreign

direct investment - this means there is a lot of inward investment into the UK economy.

• Reasons why foreign firms locate in the UK:– High-skilled labour force and higher quality production– Tariff-free access to the EU market– To buy existing UK-owned brads and distribution networks– The English language is the accepted international language of

business• When foreign firms or MNCs decide to close a plant in the UK,

the problems are:– Jobs are lost from the plant itself– Jobs are lost from other UK companies who supply that plant.

Benefits of globalisation for the UK labour market

Drawbacks of globalisation for the UK labour market

• Jobs are created in sectors where the UK does well (ie: financial services and highly specialised manufacturing)• New migrant labour skills lower costs and increase competitiveness• New migrants can fill gaps in the UK labour market• There are opportunities to increase exports to new markets.

• Low-skill jobs are lost, particularly affecting manufacturing regions of the UK• Increase in immigrant labour lowers wages• Relocating production overseas can cause unemployment

Impact of migration on the UK economy

• Migrate – the movement of people from one country or region to another

• Mobility of labour – the ability of workers to change between jobs

• Immigration – migration INTO a country• Emigration – leaving one’s native country or

region to settle in another.

Effects of immigration / emigration on the UK labour market:

• Immigration affects the UK labour market by:+ bringing new knowledge and skills, and filling gaps in the

labour market+ reducing wage inflation and increasing competitiveness+ providing more workers to support the UK’s ageing

population+ increasing the number of consumers as well as producers.- Depresses wages, and can displace low-skilled UK workers- Increases strain on social services, education and hospitals

• Emigration can affect the UK labour market by:– Losing valuable skills/human capital – BRAIN DRAIN+ Reducing unemployment in recessions