Economics of Social Issues

Goods mobility brought about by globalization have similar effect as factor mobility. The abundance of capital in rich nation has resulted into exportation of capital-intensive goods, while the abundance of labor in poor countries has resulted into exportation of labor intensive goods. The increase in demand for labor and the decrease in demand for capital in poor nations raise wages and reduce capital rentals. In rich nation, the reverse can occur. In case the equilibrium is for less than full specialization, factor prices can move toward equality among nations just like in factor mobility case. Trade reduces inequality among nations since the incomes’ ratio per capita is relative to ratio of wages.

Inequalities in Poland

According to Suter (2011), the process of globalization has considerably affected the labor market in Poland. The process has resulted into huge pool of unemployment and wage differential, thus failing to reduce inequalities in Poland. In Poland, there is an increased wage inequality among skilled and unskilled workers, which has been brought about by globalization. Wage inequality is still high in sectors that mostly affected by globalization such as food production, car manufacturing and office machinery. The current trade liberalization in Poland has resulted into increasing wage gaps among the educated and uneducated individuals. The current combination of change in technology and globalization of markets in Poland has increased faster the demand for and the wage premium for skilled labor than the way the system of education is supplying trainable and skilled workers thus increasing inequality in income.

Inequality has failed to reduce in Poland due to global capital markets. High inflows of capital resulted into inflationary pressure and hurt labor-intensive agriculture and manufactured exports in Poland. During the boom the poor benefited less and lost a lot during the bust. In Poland, with capital fleeing, it was forced to charge high interest rates so as to protect its currencies, thus affecting negatively small capital-starved enterprises and their employees who earn lower wages. This resulted into reduced general employment level and thus increases inequalities. High interest surroundings also happen to favor net savers and impacts negatively on small debtors (Suter, 2011).

Conclusion

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