Abstract

Given recent arguments among economists on the impacts of trade globalization, this paper looks at the time series and across country data to discuss trade and its impacts on worker’s pay especially in developed countries. Based on the data published by the Bureau of Labor Statistics of the U.S. Department of Labor between 1978 and 2006 among 13 countries, the paper analyzes and examines the relationship between the growth rates of a country’s productivity and the worker’s real compensation in manufacturing sectors. The results reveal a pattern that the growth of worker’s compensation has declined especially in the developed world during 1992-2006 when compared with the period of 1978-1991. Base on the findings, the paper discusses these questions. What are the reasons and implications of the trend? What are arguments surrounding productivity and worker compensation? What are the impacts of free or freer trade on worker compensation in the future? What are the differences between developed nations and newly industrialized nations in workers’ compensation growth in the age of globalization? What are the implications for free trade theory in general and the factor equalization theory in specific? Unlike studies which focus on issues of trade effects and inequalities between tradable and non-tradable industries within a nation, this paper analyzes and compares trade impacts of worker compensation in both developed and newly industrialized economies.