Globalization’s Impact on US Worker Productivity

 

When considering the impact of globalization on US worker productivity, the last industry to be considered would be that of shopping centers, like Westfield Corporation, whose industry falls primarily into property management/operations and development. More often, globalization and productivity is considered with respect to adjacent industries like retail or food service. However, the fascinating aspect of shopping center development and operations is how intertwined the those functions are with that of the retail and foodservice establishments.

This dynamic exists because the globalization of trade has allowed for goods to be provided to retailers at lower prices, which in turn frees up capital for other aspects of the retailer’s business, such as marketing and location, if they choose to operate a physical storefront (Wrigley et al., 2010). At the heart of Westfield’s operations is the marketing and maintenance of the physical properties and their tenants in its portfolio, and a critical new area of its operations includes building technology operations that allow it to execute more efficiently. The base of its technology operations is located in San Francisco, but its employes hail from Australia, China, and Europe. For Westfield, which was founded in Australia in 1960, the United States represented an international market. It now operates shopping centers in the UK and soon Italy. At the heart of the company’s strategy has been international expansion, and to embrace globalization as a core part of transforming its operating model.

Related to Westfield’s embracing of globalization, there is some data worth noting. While numerous studies cite the positive correlation globalization demonstrates relative to productivity, some literature also suggests that certain macroeconomic variables can have a significant impact on whether globalization’s impacts are positive, negative, or neutral:

Clearly, globalization has facilitated technology transfer and contributed to efficiencies in production. Yet the very diverse outcomes we observe among developing countries suggest that the consequences of globalization depend on the manner in which countries integrate into the global economy (McMillan et al., 2011).

The researchers from the World Trade Organization (WTO) go on to note that there are three major factors that determine whether companies operating in certain countries realize a positive impact from globalization:

  • Economies dependent on exports of natural resources are at a disadvantage
  • Countries with undervalued currencies experience more positive change
  • Countries with very flexible labor markets experience the greatest positive change

In the case of a shopping center operator like Westfield, globalization’s impact has typically presented positive change, because of the company’s focus on markets like Australia, the United States, and Europe, which all have extremely flexible labor markets (Klau et al., 1986)

Further support of the findings from the WTO’s research can be found in a study conducted on the effects of globalization and the creation of large shopping malls in India, which would fall heavily into the first two categories mentioned above, and less so the third. The study of Indian mall retail operations indicated that the regions of India in the North and West, where the localized labor markets were more flexible than other regions, showed the greatest gains in productivity and employment metrics (Kalirajan et al., 2009).

As a basis of comparison, while Westfield does not operate any of its malls in India, it does operate them in the UK, as mentioned earlier. In a study on globalization’s impact on productivity levels conducted by the University of Birmingham, researchers there found a strong positive effect on productivity from globalization:

These results have important policy implications. If the productivity growth of domestic retailers benefit from the presence of domestically- and foreign- owned retail MNEs, policies aimed at attracting foreign investment may, as a consequence, be an instrument to reduce the productivity gap and boost the performance of the British retail industry. (Anon-Higon et al., 2008).

In short, the argument from these researchers followed the same vein to the earlier research cited: globalization can have a positive impact on productivity, but it is critical to note that macroeconomic factors and policy had the greatest potential to ensure operational benefits to local companies, and that local companies would not be able to benefit from globalization on their own.

 

References

Anon-Higon, D., Vasilakos, N. (2008). Productivity, Multinationals and Knowledge Spillovers: Evidence from the UK Retail Sector. Birmingham: MPRA. Retrieved from: http://mpra.ub.uni-muenchen.de/7181/1/MPRA_paper_7181.pdf

 

Klau, F., Mittelstadt, A. (1986). Labor Market Flexibility.  Paris: OECD. Retrieved from: http://www.oecd.org/eco/growth/35558438.pdf

 

McMillan, M., Rodrik, D. (2011). Globalization, structural change and productivity growth. Geneva: World Trade Organization. Retrieved from: https://www.wto.org/english/res_e/booksp_e/glob_soc_sus_e_chap2_e.pdf

 

Wrigley, N., Lowe, M. (2010). The Globalization of Trade in Retail Services. Paris: OECD. Retrieved from: http://www.oecd.org/tad/services-trade/46329746.pdf

 

Kalirajan, K., Singh, K. (2009). The Impact of Globalization on Employment Generation in India: The case of emerging ‘Big Shopping Malls and Retailers’.

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