The Impact of Economic Globalization on the Labor Market of an Open Small Economy

Abstract

The globalization of national economies and markets is a noticeably prominent tendency in recent decades, and the expansion of activities of multinational enterprises (MNEs) is one of the most prominent features of the global economy. The expanding economic globalization process was induced by a complex interaction of growing international trade and foreign direct investment flows, the diffusion of new technologies, evolving corporate strategies toward a more global focus, and labor force movements. The features of the labor market are being modified by the impact of globalization. Economic globalization has both a positive and negative impact on the labor market of a small open economy. The people of small open economies participate in the economic globalization process in two ways: many local employees work for the affiliates of MNEs and acquire new qualifications and experience, while others move to more developed countries looking for a better salary and better conditions of life. The expansion of activities of MNEs not only has a great impact on the qualifications and structure of local human resources but also alters the labor market demand in a small open country, especially in one with a high concentration of activity and low level of competitiveness.