By World Bank Group
Booklet through international financial institution team
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Extra resources for Involving Workers in East Asia's Growth (Regional Perspectives on World Development Report 1995)
China and others are doing that, and the effects of their opening are likely to be large. Yet economies at all income levels fear what they perceive as the consequences of a global economy transformed by the entry of labor-intensive giants like China. Other low-income economies fear losing market shares to new entrants; middleand high-income countries wonder whether their wages must fall as their workers are forced to compete with workers whose wages are only a fraction of theirs. It is true that competition from new entrants into world markets will necessitate adjustments in many economies and that some workers will be hurt by these changes.
Growth rate of GDP per worker, by region, 196593 (percent) Note: Europe and Central Asia includes only middle-income countries in Europe. Source: EBRD 1994; Kornai 1992; World Bank data. share of employment in industry and services expanded from 36 to 46 percent. But over the next twenty years, as productivity growth slowed and eventually turned negative, the share increased only another 8 percentage points. Even more telling, only 2 percentage points of that increase was in private wage employment.
It is the potential fall in the prices of labor-intensive goods that could hurt workers in other countries. However, this risk has to be offset against two other effects already introduced in the discussion of industrial countries. First, cheaper laborintensive goods bring benefits to the workers that consume themthey are often wage goods. And second, when China exports more, it also imports more. Both effects might apply with more obvious force to trade with industrial countries, whose workers consume more toys or electronic goods produced in China and are more likely to be producing the capitalintensive goods benefiting from East Asia's growth.