How has the presence of an increasingly more global labor market softened the impact of the financial crisis 2008 for the U.K. economy?

• Date: 01 September 2019
• DOI: http://doi.org/10.1002/jsc.2286
• Author: David Floyd
• Published date: 01 September 2019

RESEARCH ARTICLE

How has the presence of an increasingly more global labor

market softened the impact of the financial crisis 2008 for the

U.K. economy?

David Floyd

Lincoln International Business School,

University of Lincoln, Lincoln, United Kingdom

Correspondence

David Floyd, Lincoln International Business

School, University of Lincoln, Lincoln LN6 7TS,

United Kingdom.

Email: dfloyd@lincoln.ac.uk

Abstract

The changing labor market and a global labor force have helped keep costs down.

This has helped reduce the impact of the recent financial crisis. Technological devel-

opment has also contributed to this process. Policies have been adopted to open up

global labor markets. Reforms have been made to make labor markets more flexible.

This article considers the main factors that have motivated workers to go abroad. It

also looks at the impact of a more diverse workforce on the economy since the finan-

cial crisis. The article draws on theories of mobility, employment, and global migration

reports. Evidence would suggest that providing flexibility in the labor market is one

of the keys to recovery from the financial crisis.

1|INTRODUCTION

It has often been shown that increasing trade and reducing trade bar-

riers have been the key to reducing the effects of a financial crisis.

Indeed, the worst financial crisis in the 1930s was a time where trade

in manufactured goods fell by a third. There was a move in the 1930s

to implement tariffs and quotas, which both reduced the quantity of

goods on offer as well as increasing the price. This therefore prevents

countries from finding niches in differentiating their products as well

as producing goods, which provide greater consumer surpluses in

terms of lower prices as shown by Krugman, Obstfeld, and Melitz

(2018). Indeed, Porter, 1990 shows how countries can benefit from

product differentiation as well as producing products that are both

cost efficient as suggested by Ricardo's (1817: Ch. 7) theory of com-

parative cost advantage. There was also less labor mobility in the

1930s and transport was very costly (Govindarajan & Gupta, 2000).

These days with easy communications via Skype and the Internet, it is

quite straightforward for firms to conduct preliminary screening of

prospective employees for example and it becomes easier for poten-

tial workers to search for overseas opportunities via the Internet. In

many European Union (EU) countries, for example, workers are now

paid in the same currency using the Euro making the assessing of job

opportunities overseas much easier to carry out. Moreover, better

communication also led to coordinated action on the recent financial

crisis very much supported by the former U.K. Prime Minister Gordon

Brown. Loose monetary policy and Quantitative Easing and stimulus

for some countries resulting from this coordination of global policies

also helped calm things in 2008. This is indeed one of the factors that

has led to a slow recovery from the 2008 financial crisis but less

severe than the 1930s crisis. Transport costs are much cheaper with

budget airlines that potential workers can consider casual labor as well

as longer-term opportunities and this therefore gives companies

greater opportunities to choose from wider potential pool of workers.

Indeed, this is not just a U.K. phenomenon, for example, in Singapore

and Hong Kong many workers are from overseas and may be on

short- or long-term contracts, and this flexibility of the workforce

allows firms to suffer less from financial downturns or deeper financial

crisis.

2|GLOBALIZATION OF THE WORKFORCE

More recently, authors such as Dunning (1993) have suggested fur-

ther benefits of employment and growth to be achieved from foreign

direct investment. A more open global trade environment has seen

foreign direct investment as being the largest increasing productive

JEL classification codes: F1, O10, P4.

DOI: 10.1002/jsc.2286

Strategic Change. 2019;28:321–323. wileyonlinelibrary.com/journal/jsc © 2019 John Wiley & Sons, Ltd. 321