What’s the answer when globalization causes people to lose jobs?

While free trade can make both countries that trade better off overall, it can also negatively affect certain towns or regions in one or both countries. This can happen for example when another country manufactures a good more cheaply than it can be manufactured domestically in the US. When overseas wages are lower than wages in the US, the lower production costs may mean the good can be made more cheaply overseas. As a result, Americans would naturally decide to export the good from that particular country overseas rather than buy the local product--assuming no high tariffs or taxes on the imported good. Unfortunately, this could cause situations where factories or companies have to fire people and even close down.

According to an article in The Economist this week, it’s difficult to know what policies to use to respond to this problem. One policy, using government subsidies to keep an industry going, can just end up making the depressed town or region overly dependent on the subsidy and doesn’t really provide a solution. Another solution, according to economic theory is for the people who lose their jobs to move to a more prosperous town or region and take on different jobs. But many people would find a move disruptive to their lives. According to The Economist some subsidies can actually work well when the money is used to retrain people. Tax incentives as a subsidy can also work when they attract new businesses to set up in a depressed area. There could be problems here too when the incentives expire. Will firms even leave once incentives expire? Globalization and its different effects can present some big challenges in these ways as well as opportunities.

https://www.economist.com/news/briefing/21730406-what-can-be-done-help-them-globalisation-has-marginalised-many-regions-rich-world