What this lesson teaches
I can define globalisation as rising trade and flows of capital and labour, and explain what drives it.
Syllabus 9570, 3.3.1(a). Globalisation, International Trade and Economic Co-operation: Globalisation as the increased trade of goods and services, and flows of capital and labour between countries; Factors affecting globalisation
I can weigh the benefits and costs of free trade and open flows for consumers, producers and governments.
Syllabus 9570, 3.3.1(c). Globalisation, International Trade and Economic Co-operation: Benefits and costs of free trade and flows of capital and labour on:; Consumers - Prices, choice and variety of goods and services; Producers - Size of markets, degree of competition, cost of production and innovation; Government - Macroeconomic objectives (and policy choice)
Make a guess
Foreign specialists join a Singapore tech firm and work alongside local engineers. Do local engineers' wages have to fall?
- Yes, because firms pay foreign specialists less than locals.
- No. Complementary skills can raise local pay.
- No. Wages are set by law, so they cannot change.
Show the answer
No. Complementary skills can raise local pay.
If foreign workers bring skills that locals lack, local engineers can produce more, which can raise their pay.
Foreign workers ease labour shortages and bring skills, but can affect local wages and put pressure on infrastructure.
Foreign workers can fill labour shortages, raise output and bring specialist skills. Singapore relies on them in construction, healthcare and specialist technology roles, especially as its population ages.
Effects on local workers depend on skills. Foreign workers with skills that complement locals can raise local productivity; those with similar skills increase competition for jobs.
Migrants also spend, raising AD, but they add to demand for housing and transport, which can take time to expand.
Singapore uses levies and quotas on foreign workers to balance these effects.
- Benefits
- Ease shortages, bring skills.
- Costs
- Pressure on housing and transport; competition for some jobs.
Worked example: Recruiting nurses from abroad
Singapore recruits nurses from abroad to staff new clinics. Existing nurses have heavy workloads. Housing supply is slow to increase.
- More nurses let clinics treat more patients: output rises.
- Existing nurses' workloads fall, which can improve care.
- Extra demand for housing may push up rents in the short run.
- The source country loses trained nurses, which may hurt its health system.
Watch out for this
Foreign workers always lower local workers' wages.
If their skills complement local workers, they can raise local productivity and wages.
Check your understanding
How can foreign workers raise Singapore's productive capacity?
- By adding to the labour force and bringing specialist skills.
- By reducing the demand for goods, so that prices and firms' costs fall.
- By lowering government spending on training local workers.
Show the answer
By adding to the labour force and bringing specialist skills.
Right. More and better labour shifts AS right.