The Threats Emerged from the Globalization of Production - Research Paper Example

In the present environment, the organizations are more capable to expand the operations globally. The organizations are more able to locate each production stage in a country where the product can be done at minimum cost, and to transmit the ideas for the new products as well as new ways to produce merchandises across the globe.These new attributes of the globalization put an impact on the industry structure, labor markets and the industry location in both national as well as regional economies.

When the firms in the United States extend the production across borders, they normally shift less number of skill-intensive activities to other countries and retain more skill-intensive activities at the country itself. This type of foreign outsourcing can bring in a change in the demand for both skilled and unskilled labor and would incorporate changes in the structure of the wages both at abroad and home. Furthermore, the outsourcing can occur among different neighboring countries Mexico and like the United States or China and Hong Kong.

In such a case, the globalization of production would raise the enticement to produce in the regions with comparatively low-cost access to the foreign markets. The location of the economic activities can also alter, even inside the countries (Hanson, 2001).Globalization has engrossed a considerable deal of academic attention. However, this has incorporated dramatic changes in the wage structure in the advanced countries. Since the late 1970s, real wages of the skilled labors in the US have experienced a steady increase, while that of the less skilled workforce have more or less stagnated or in some case, have been reduced.

The inequality in the increasing wage has risen as more trade has been happened with the low wage countries. The effect of the trade on the wages cannot be identified easily as some other intensive shocks have also occurred in the markets at the same time.