Discussion Paper No.1104

Title:Globalization and Economic Welfare: The Presence of an Unfair Gap between Skilled Workers
Authors:kenji Kondoh


By focusing on the unfair gap between skilled workers of uniform quality, where unionized older workers are employed permanently with higher wages, but younger workers fail to occupy permanent positions and are employed as uncertain temporary staff on lower wages, we investigate the effects of the two types of globalization caused by the increasing immigration of foreign unskilled workers and trade liberalization. Under certain conditions, the immigration of unskilled workers might expand the income gap between the two types of skilled workers, but it would have a positive effect on national welfare. Thus, with adequate income re-distribution policies by the government, immigration could be a welfare-improving policy. In contrast, although trade liberalization may reduce the wage gap between the two types of skilled workers, every worker may lose out, and the welfare-improving possibility of trade liberalization may be relatively small. We also suggest that every worker may gain from an increase in the legal minimum wage.

JEL Classification Numbers: F16, F22, J61
Keywords: temporary staff, unionization, international migration, trade liberalization