Theorist Eric Maskin: Globalization Is Increasing Inequality

Waves of trade and globalization can lift average incomes and reduce inequality, but that requires intervention to prevent rewards landing in only a few hands. Nobel Laureate Eric Maskin of Harvard University points to two types of inequality for World Bank News: In the more tolerable case, only select industries and their workers benefit from increased demand, and “In the ‘worse’ version, the wages of a segment of the work force (usually low-skilled and low-wage workers) drop as a result of less demand for their skills, while the wages of higher-skilled workers increase.” Inequality expands when workers’ skills do not match the tasks at hand or when workers have incentives to cross borders and abandon low-skilled workers locked into location. Competition in the modern labor market increases wages only for those with highly demanded top skills. Globalization won’t be stopped, Makin concedes, but governments, universities and others can intervene to provide more skills training that reduce wage inequality, offer opportunity to all citizens, which in turn could stabilize consumer markets and reduce the global discontent. – YaleGlobal