Eric Maskin, Nobel laureate economist and expert on labour markets, has told Emerging Markets that the World Bank has a potentially crucial role to play in offsetting the impacts of globalisation on low-skilled workers in developing countries.
While free trade rather than protectionism benefits countries that take part, as economic theory has posited for two centuries, the benefits are not shared equally. Skilled workers benefit from higher wages resulting from their ability to produce goods such as software for the West, but low-skilled workers’ wages stagnate as they are stuck in less productive activities such as agriculture.
“The problem is getting unskilled workers to the point where they have entered the global labour market, which is difficult because if they are completely unskilled they have nothing to offer,” he said, on the sidelines of the 5th Lindau Meeting on Economic Sciences. “There should be more of an emphasis on human capital and less on physical capital — building things. The World Bank might consider making an investment in skills as the people getting those skills can take them wherever there are opportunities.”
He said a “reasonable” response was to intervene to raise skill levels through job training and education. “Of course providing education and training is expensive and there is the question of who is going to pay for it.
“Unfortunately the workers are not likely to be able to pay for it as they are some of the poorest people in the world,” he said, pointing out that firms would be unwilling to invest money in training people who would then quit for another employer. “So the obvious candidates are governments and international agencies like the World Bank.”