Multiple Choice
Which of the following will cause a decrease in the demand for labor?
15. Markets for the Factors of Production
Shifts in Labor Demand
Multiple Choice
How can globalization affect domestic labor markets?
A
It only increases domestic labor demand by opening new export markets, raising employment across all sectors.
B
It can both decrease demand for some low-skilled domestic labor through import competition or offshoring and increase demand for skilled workers in export-oriented and high-tech sectors.
C
It reduces demand for all domestic workers by shifting production entirely overseas.
D
It primarily affects labor supply rather than labor demand, so it has little impact on wages or employment in domestic industries.
Verified step by step guidance1
Understand that globalization influences domestic labor markets through changes in both labor demand and labor supply, but primarily through demand shifts caused by trade and production decisions.
Recognize that import competition and offshoring can reduce demand for certain types of domestic labor, especially low-skilled workers, because firms may import cheaper goods or relocate production to countries with lower wages.
Acknowledge that globalization can increase demand for skilled workers in sectors that benefit from access to global markets, such as export-oriented industries and high-tech sectors, which may require specialized knowledge and skills.
Analyze how these opposing effects create a reallocation of labor demand within the domestic economy, leading to potential wage disparities and employment shifts between low-skilled and high-skilled workers.
Conclude that globalization's impact on domestic labor markets is nuanced: it does not uniformly increase or decrease labor demand but rather changes the composition of demand across different skill levels and industries.
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