Case Study 8 - Workers in the Global Economy

Question 1

Globalisation (4.1.1)

How has globalisation contributed to the decline in labour’s share of global GDP, as per the case study?

Answer 1

• Outsourcing: Multinationals shifted production to developing nations with lower labor costs, reducing wages/jobs in developed economies (Page 2: “globalisation… outsourcing manufacturing”).
• Wage suppression: Increased labor supply from migration and offshoring depressed wages (Page 2: “migration… depressed wages”).
• Paradox: While inequality rose in developed countries, globalisation reduced poverty in developing nations (Page 5: “extreme poverty decreased… to 690 million in 2022”).

Question 2

Inequality (4.2.2)

How does the decline in labour’s share of GDP worsen income inequality?

Answer 2

• Capital vs. labor income: Labor income is more evenly distributed; capital income favors the wealthy (Page 2: “capital income… concentrated among wealthier people”).
• Case study data: Labour’s share fell 1.6 percentage points since 2004 (Page 1), equivalent to a $2.4tn loss (inflation-adjusted).
• Regional impact: Sharpest declines in Africa, Americas, and Arab states (Page 2).

Question 3

Globalisation (4.1.1)

How do “superstar companies” exemplify globalisation’s role in inequality?

Answer 3

• Profit concentration: Firms like Apple and Amazon retain profits for shareholders/directors, not workers (Page 5: “share less profits with employees”).
• Global dominance: These companies leverage global supply chains and markets, exacerbating wage stagnation (Page 2: “rise of superstar companies”).
• Case study link: ILO notes 40% of labour’s GDP decline occurred post-2019 (Page 1), aligning with tech giants’ growth.

Question 4

Inequality (4.2.2)

Illustrate the impact of falling labour share on income inequality using a Lorenz curve.

Answer 4

• Lorenz curve shift: A decline in labour’s share moves the curve further from the equality line (Page 4 diagram: L1 → L2).
• Gini coefficient: Rises, reflecting higher inequality (Page 4: “increase in the Gini coefficient”).
• Case study context: Labour’s share fell to 52.3% in 2022 (Page 1), widening the income gap.

Question 5

Globalisation (4.1.1)

Evaluate how technological change (e.g., AI) interacts with globalisation to affect inequality.

Answer 5

• Capital-biased tech: AI favors asset owners over workers (Page 2: “AI might be more capital-biased”).
• Global adoption: Tech firms operate globally, centralizing profits in wealthy nations (Page 2: “consistent with… innovation hitting earnings”).
• Case study warning: ILO urges policies to ensure AI benefits are “widely distributed” (Page 2).

Question 6

Inequality (4.2.2)

Why has union decline exacerbated inequality, according to the case study?

Answer 6

• Reduced bargaining power: Fewer unions mean weaker wage negotiations (Page 2: “unions’ waning power”).
• Sector shifts: Decline in unionized industries (e.g., coal, manufacturing) reduced labor’s income share (Page 5: “decline in coal mining… manufacturing”).
• Case study link: Labour’s share fell 1.8 percentage points in Europe/Central Asia (Page 2), regions with historic union strength.