Globalisation should be a winner for all, but people are earning less of the wealth generated by economic growth and integration as the decades go by, the OECD said today.
In a report on jobs policies, the Organisation for Economic Co-operation and Development remained faithful to its mandate as a promoter of free markets, trade and investment, but said it was time for a reality check on globalisation's darker side too.
Governments had to address public concern over jobs and pay in a world being transformed at unprecedent speed by technology, cheap transport and communications and the rise of China, Russia, India and Brazil and vast pools of cheap labour.
"It's still a win-win process for all countries," Raymond Torres, the report's main author, said in an interview.
Raymond Torres, author of OECD report
"But just because markets are good for growth, not wanting to see these vulnerabilities would be counter-productive."
The report offered a reality check on the negative aspects of globalisation, real and perceived, and urged action.
"Over the past two decades, the share of wages in national income has tended to fall in the majority of OECD countries," said the report from the Paris-based organisation, whose 30 members are mostly wealthy, industrialised economies.
"One thing we see in most countries is a decline in the wage share as a percentage of GDP. It's quite remarkable." Torres said. It was not just a cyclical issue, he added.
Japanese wages have fallen by around 25 per cent as a share of GDP in the past 30 years, while they have dropped by around 13 per cent in the 15 wealthier European Union member countries, and by 7 per cent in the United States, the OECD report showed.
"Even in countries like the US, where you have had tight labour markets, you have had a declining wage share too." said Mr Torres. "Wages have grown less than productivity."
The report also said the divide between high-earners and those at the bottom end of the scale had widened, and feelings of job insecurity had grown more acute, a factor which probably explained low wage growth, in part at least.
Offshoring, where companies reallocate various parts of the production process or services to cheaper places, was not as big a job-killer in OECD countries as believed, but the impression was enough to fuel insecurity, especially among the low-skilled, Mr Torres said.
The pool of cheap labour has surged since China opened its doors to the outside world and workers compete on an increasingly global scale because cheaper technology, transport and telecoms make it easier for firms to organise on an international scale.
China, India, Brazil and Russia account for 45 per cent of the world's total labour supply today, compared to just 19 per cent for the whole of the OECD, which comprises the United States, Japan and much of Europe.
The OECD urged governments to resist protectionist reponses and instead adapt employment policies to help people move from one job to another with greater ease and sense of security.
"The 'job for life' is dead," Mr Torres said.