Impacts of Globalisation

Globalisation refers to the increased interdependence amongst nations. It also refers to the way people, businesses and governments around the world become more connected.

Employment levels in developing and developed countries

Globalisation has affected employment in many different ways:

1. It has allowed outsourcing to occur; outsourcing occurs when a non-core business activity is completed by a third party, for a fee. This has created jobs in developing countries.

2. Globalisation has provided the opportunity for MNCs to collaborate with businesses in smaller countries. This would increase employment in developing countries.

3. However, when MNCs move overseas, they may bring new technologies with them. Those in developing countries may be unaware on how to use it, thereby becoming structurally unemployed. In this case, globalisation can lead to decreased employment in developing countries.

4. Globalisation has also facilitated the migration of labour and skilled workers can move around the world. This tends to increase employment in developed countries.

5. Businesses now realise that they can outsource tasks to developing countries, who can produce the same work for lower rates. As a result, this can decrease employment in developed countries.

Global Spread of Skills and Technology

Globalisation has facilitated the global spread of skills and technology.

Skills

• Increased demand for skills in specialised areas

• Increased demand for highly-educated individuals, specifically by MNCs

• Workers migrate due to attractive job offers

• Domestic government emphasises upskilling to make workers more competitive

Technology

• Changed consumption patterns (e.g. consumers use e-commerce to buy online)

• Ability to transfer funds electronically and securely

• Increased identity theft and digital fraud

• Easier to store and share digital information

International Cooperation

Globalisation has also impacted international cooperation, which refers to how well countries and governments get along with each other. There are many reasons that have contributed to this increase in international cooperation:

1. ICT advancements have allowed information and knowledge to be transferred. Experts from around the world can easily communicate with each other through online platforms.

2. Free trade agreements and trading blocs have facilitated trade liberalisation, which involves the reduction of trading barriers. Businesses can globally participate in transactions with no limitations. This has lead to increased trade around the world.

3. Global travel has also increased; conferences occur around the world that involve collaboration amongst leaders. This has also improved international cooperation

Examples of oragnisations involve the World Trade Organisation, FTAs and the G20 for Australia.

Domestic Markets

Globalisation has also had an impact on domestic markets, which are the markets that operate within one’s own country.

1. Local businesses now have the chance to collaborate with businesses from all over the world. This increases their financial growth opportunities.

2. However, local firms also face competition from companies all over the world. This makes it harder for them to stay ahead and in some cases, it could force them to shut down.

3. Domestic consumers have increased choice and can purchase products globally.

4. Domestic markets are able to purchase raw materials and inputs at lower rates from different countries.

5. Opportunities have also increased for both domestic consumers and businesses, in terms of collaborations and job opportunities.

Tax Minimisation

Tax minimisation is a somewhat unintended effect of globalisation.

A tax haven is a country that has low taxes and secretive tax laws, for both non-residents and foreign companies. This attracts MNCs, who move production and other operational activities to these countries. Tax havens tend to have very strict bank secrecy, unrestricted capital flows between countries, and tax exemptions for most.

Transfer pricing is a phenomenon designed to evade paying high taxes. Within a company, profits tend to be relocated from a high-taxing economy, to a low taxing economy to avoid paying tax. This is made possible due to tax havens.