Dynamic effects of globalization:
Labor markets over time

    This handout illustrates how, with globalization, labor market conditions can motivate an industry to shift abroad for two alternative reasons.
    Example: consider the labor market for the shoe industry in South Korea, a leading shoe exporter in 1988.

Event: Employment falls in South Korea's shoe industry labor market after 1988
Case 1	Case 2
Case 1: Lower wages abroad          => DL shifts left, as cheap foreign labor pulls the industry out	Case 2: Higher wages at home       => SL shifts left, as higher domestic wages push the  industry out

    Case 1 is most common when previously isolated countries globalize.
    It occurs because we are not yet a fully globalized economy
    An example: China's recent entry into the WTO and the decision to end global quota restrictions on textiles causes a shift of textile production from Mexico to China, putting downward pressure on wages in Mexico as labor demand shrinks in Mexico's textile industry.
    Lower wages in China pull textile firms out of Mexico. Demand for labor falls (a shift of demand).

    Case 2 is most common when already globalized countries grow.
    It occurs continuously as countries develop in a globalized economy.
    An example: South Korea's rapid growth under its export-led industrialization (ELI) helps the country's workers become more productive and better suited for higher-skilled opportunities in other industries, putting upward pressure on shoe industry wages as the industry's labor supply shrinks.
    Higher wages in South Korea push shoe firms out. Quantity demanded of labor falls (a movement along demand).