Concerns that technology and globalization will result in ever-increasing inequality have risen massively in the United States and elsewhere over the past few years. The contentious nature of the debates around the causes of inequality is a reflection of the numerous, intricate ways in which technology and globalization are changing the world economy.
Many of the duties and tasks that low-skilled people used to undertake have been replaced by modern technology, which also serves to supplement the work of trained professionals. The increased value that technology places on skills is perhaps the most obvious way that it affects inequality. Trade in developed nations strengthens this impact by promoting specialization in high-skill industries where those economies have an advantage. According to the same logic, income inequality should decrease in developing nations with a focus on low-skilled industries. In reality, though, competent employees from emerging nations might fill those positions, resulting in wider distributions.
Due to the mobility of firms, investments, and skilled workers, globalization has encouraged a race to the bottom on some regulations and redistributive policies. This forces governments to match the conditions of their rivals in order to retain and attract business. Historically, the share of income accruing to employees compared to capital owners was steady, but it has dropped across most countries and industries since the 1980s as technology has made capital goods cheaper. By replacing unskilled labour, technology has boosted not only the premium on skills, but also the importance of capital in production.This contributes to inequality because capital ownership is particularly unequal and creates significant investment income for many of the same people who already earn high salaries.
As the effects of technology and globalization on inequality appear to be inevitable, there are three major areas that we need to keep track of:
The way that global integration changes the benchmarks people use to assess and contrast their lives is a significant factor. Numerous social issues are attributed to public rage over the unfair impacts of technology and globalization, including the rise of nationalism and identity politics, contempt for institutions, and the breakdown of the international system that is apparently a rule-based system. Thus, it will depend more on how inequality is seen and handled than it will on any objective measure of inequality as to whether that fury lasts.
There is a growing concern about the possibility of widespread job automation. Robot sales have increased significantly over the past year, which has coincided with advancements in the ability of machines and artificial intelligence to perform increasingly sophisticated, non-routine activities like driverless vehicles and semi-cognitive abilities like speech recognition.
Evidence of premature deindustrialization is emerging as developing economies struggle to build up a manufacturing base. This contrasts with the path taken by western economies. These trends mirror the pattern already seen in the west and point to the hollowing out of labour markets in developing economies. The traditional comparative advantages of developing economies in the international market and their abundance of inexpensive labour is threatened by the displacement of employees by robots. At the same time, the digital economy offers chances for connecting workers in developing nations with businesses and clients in developed nations, providing a temporary reprieve from the dangers associated with labour-saving technologies.
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