How Globalization affects Employment
October 6, 2010 6 Comments
Industrial production related employment had produced the middle class and the overall prosperity in the United States. Such employment has distinguished developed markets from those developing and undeveloped, indeed. The higher income from relatively higher margins of the industrial employment has helped fiscal reserves to increase, the social and infrastructural expenses to be enhanced, hence to setup the developed world’s higher standard of life and overall prosperity. In the last couple of Centuries, the United States had led the developed world into creating a vivid and productive workforce to respond to the demand, national and international, for industrial goods and the related engineering, marketing, etc employment. The system had performed sufficiently enough to let countries like Germany, Japan, e.g. to distinguish as highly developed industrialized nations. Developed industrialized countries had reached high productivity carried on by ever-developing mechanization, adequate education, infrastructure, and most important adequate employment. The industrial employment had been a main part of the market demand that spurred economic growth.
However, the China’s industrialization and the Soviet Block demise has changed the marketplace and related competition: whereas the globalization has accelerated and the productivity has risen ( From 1968 to 2012, the American economy grew tremendously, driven in large part by a 124 percent increase in worker productivity). The vest Chinese capacity of qualified inexpensive labor and well developed infrastructure (labor expenses have been rising steadily, however the Chinese consumption has compensated by rising too). Comparably to China, the Post-Eastern Block has not succeeded in prompting adequate market development (i.e. economic growth).
Transnational corporations have been taking advantage of this new emerging opportunities, through moving and outsourcing of industrial production, through acquiring inexpensive assets (particularly in the Post-Eastern Block) and market expansion “CATCHING FISH IN THE MUDDY WATER”. However, Transnationals’ access to large pool of qualified workforce has lowered these markets equity and the consequential demand by reducing salaries in an not functioning labor market.
Simultaneously, the US and other most developed markets’ industrial employment has been steady declining, alone with the middle class and fiscal reserves. Deficit has been running high alone with national debt.
- “The OECD unemployment rate decreased by 0.1 percentage point to 7.8% in November 2013 compared with 7.9% in the previous five months. Across the OECD area, 47.1 million persons were unemployed in November 2013, 12.4 million more than in July 2008″ http://bit.ly/1eBAtCy
- Median real income in the US is below its level in 1989, a quarter-century ago; median income for full-time male workers is lower now than it was more than 40 years ago.
Read more at http://www.project-syndicate.org/commentary/joseph-e–stiglitz-argues-that-bad-policies-in-rich-countries–not-economic-inevitability–have-caused-most-people-s-standard-of-living-to-decline#WhcxT0WBeYDbD2YV.99
- In the US ”If the minimum wage had kept pace, it would be close to $22 per hour. Yet the minimum wage has not even kept up with inflation and is actually almost a third lower in value than it was in 1968—contributing directly to rising levels of income inequality.”
- “Wage growth will help decide whether Prime Minister Shinzo Abe achieves his central goal of lifting Japan once and for all out of its 15-year deflation, said Yuriko Tanaka, an analyst at Goldman Sachs. “Especially important is a steady rise in the basic wage, which accounts for around 80 per cent of overall wages and has a big impact on consumer sentiment and future expected income.Overtime pay increased by 4.6 per cent in December, Wednesday’s data showed, while bonus pay rose by 1.4 per cent. Base earnings continued to decline, however, falling by 0.2 per cent.Taking inflation into account, real wages for Japanese workers fell by 1.1 per cent in December and are “unlikely to turn to positive territory in the near future, especially after the consumption tax rate hike,” said Masamichi Adachi, economist at JPMorgan.”http://www.ft.com/intl/cms/s/0/25778872-8e36-11e3-98c6-00144feab7de.html”
Unemployment Rate Progression: EU, US and Japan
- ‘Structurally high unemployment/underemployment’ was the second most concerning risk, behind ‘fiscal crises in key economies’ and ahead of ‘water crises’. – See more at: http://www.hrmagazine.co.uk/hro/news/1141595/unemployment-underemployment-named-key-global-risks#sthash.Ge8ad7sx.dpuf
- “That’s pretty consistent with the way labour markets have been developing across the whole world,” said Brinkley. “The longer the crisis has gone on, the bigger the problem of structural employment has become. The longer it goes on, the more intractable it becomes to deal with.” Brinkely said underemployment was a bigger concern within emerging markets, in it had started to emerge as an issue in the UK over the past three years. “The number of people in part-time jobs who say they’d like a full-time job is now at a record high,” he said. “In every recession you always get an increase in the number of people in part-time work who say they’d like a full-time job, because a lot of jobs are lost. “We would expect that number to fall-off as we go into the recovery, but so far we’ve seen no fall-off. “Compared to the recessions of the 1980s and 1990s, as a share of the workforce underemployment is currently much higher than at the worst point of the 1980s and 1990s.” – See more at: http://www.hrmagazine.co.uk/hro/news/1141595/unemployment-underemployment-named-key-global-risks#sthash.Ge8ad7sx.dpuf
The 2007-9 Recession has accelerated and aggregated the process of shorting employment. By itself, the 2007-9 Recession was a product of market imbalances, whereas the supply-to-demand gradually changed into demand-to-supply, because the demand in the practiced trickle-down Capitalism has become a gravitating issue.In many places at my articles employment was directed as being mostly affected by the ongoing Globalization and ever rising Productivity, however this article is to localize and show the direct consequential relation between shortening employment and the ongoing Globalization and rising Productivity. It should be quite simple of a task to be objective when observing how many mostly industrial jobs have been diminishing in numbers because either (1) the improving technologies Professor Brynjolfsson puts it like this: “There’s never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value.However, there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.” (The Second Machine Age by Erik Brynjolfsson and Andrew McAfee) or/and (2) the outsourcing and moving out of industrial production from the US and EU to China (In a recent study, the Economic Policy Institute (EPI) analyzed American jobs lost to China between 2001 and 2011. During that time, “the trade deficit with China eliminated or displaced more than 2.7 million U.S. jobs, over 2.1 million of which were in manufacturing,”), India and beyond. Thus manly these two reasons for reduction of employment are to be considered unquestionable by no one could be democrat or conservative. The difference between the democrats and the republicans is not, obviously, in the previously stated conclusion but mostly in the approach considered for getting out of the ongoing situation to economic revival that will reduce this conclusion, therefore the high and rising unemployment is directly related to the ongoing globalization and rising productivity: a fact to deal with by clearing some fundamental points. Then, only then economic parameters should be set up to overcome the situation and bring new instruments of economics to help to prompt and maintain better paid employment.
Two approaches considered:
1) First, the private employment is currently the mostly used economic instrument, which is prompted mostly (if tax breaks and subsidies are not included) by market forces. 2) Second, the government related employment has been either direct or indirect through projects or programs. Both approaches have been affected under the new conditions: in the first place, tax breaks and subsidies work until certain time when these directly could be overwhelmed by the resistance of the market forces such as shortening demand for thus manufactured goods or provided services and in the second place, under the current financial system the bulking deficit and national debt limits the abilities of any administration to keep long term projects and programs of such becoming political issue being most likely interrupted. Both approaches can not properly function in a system of high interest commercial lending because these are not directly connected to genuine market competition but are artificial methods for creating employment.
To establish more adequate market conditions for adequate employment, in which market forces are used in their best under such new developing conditions the free entrepreneurship should be let to create and maintain relative employment, whereas the role of the government is minimized.
The new conditions should be precisely evaluated and the necessary changes and approaches should be implemented:
- New global market conditions affected by the much cheaper industrial production in China, India and elsewhere have shorten the return on investment and profitability for the small and medium investors and the small to medium businesses,
- New global market has given all the powers to the transnational corporation and the big investors, which abilities to borrow on lower rates and access public funds through market exchanges, however the industrial production has been moved or outsourced the majority of their and their investment and reinvestment goes away from the US territory. Despite that the transnationals and large investors benefit directly from the globalization and rising productivity, they bring small and declining employment.
- For small and medium businesses and investors is relatively easy to open and establish new businesses, but the lack of business laws and regulations in contracting, the “shady” business practices, the lack of personal liability to corporate structures make life much easier, except when must go to the bank in attempt to borrow, and well then life may well become close to nightmare, because the financial institution consider the points from above more like a lack of security and high risk and either rejects such loans or lend on high interest to offset risk.“While the smallest businesses are growing revenues the most quickly, they are adding jobs the most slowly: From January to November 2013, micro businesses experienced 1.86% growth per employee, small businesses 0.75%, medium businesses -1.14%, and large businesses -6.72%. Strong sales and greater productivity, without employment growth, yields a jobless recovery……… Today, access to capital for small businesses is a significant problem. The largest businesses are able to secure financing with relative ease and on strong terms, including historically low interest rates. But as business size gets smaller, access to capital shrinks dramatically. For example, a recent Pepperdine University study showed a large discrepancy in bank loan approval rates: 75% of medium-sized businesses that sought a bank loan were successful, compared with 34% of small businesses and only 19% of microbusinesses” (HBR Blog Network Why Small Businesses Aren’t Hiring… and How to Change That).
- When the government gets involved by making easy loans the consequences may well follow the steps prompting to the last recession by exasperating value of equity, of overcapitalization. Because whenever the market balance is disrupted, either redundancies or shortages occur.
- The relaxing financial policies and regulations allowing large financial institutions to speculate brings similar effect to the small and medium investors what the “shady” business practices bring to small and medium businesses such as expensive money and financial difficulties because of the lack of security and high risk, indeed.
- Whenever governmental regulation are used, instead of criminalizing business violations and enhancing personal liability for corporate structures and business transactions, consequences are negative to the market forces because most of the time such regulations are quite partial and politically influenced. Thus criminalizing business violations and enhancing personal liability of corporate structures could much better equalize the so much needed small businesses and investors, which are the main employer on the US market, to the big businesses and investors, it also will jack up the security and minimize the risk to lenders.
- The role of public equity should be also fundamental in balancing the ongoing effect from the Globalization and rising Productivity: so, what “public equity” could be considered for: Infrastructure, Medicare, Social Security, Education are considered public equity because of the effect these impose over the marketplace in time of shrinking industrial production (here it should be mentioned the gaining “equity” approach is some used by China for balancing their marketplace), but here also could be stated that such policies of gaining and growing “equity” may work much better on the US market that eventually may prompt more employment by replacing the artificial governmental programs to such market related approach to balance market demand-to-supply toward inflation.
- Instead of the debt as a main economic issue in this new market economics the balancing demand-to-supply should be the main issue pinned to inflation & deflation; to succeed in these new approach Monetary Policies should be well adapted to accommodate.
- Subsidies to targeted industries of renewable energies, organic farming, environmental tourism and etc. are to be market tools to prompt some employment when simultaneously save Earth. Under the current economic approaches, industrial production is just moved from one place to another considering profitability, thus the relatively expensive technologies to generate renewable energies, whereas reducing companies competitiveness and the consequential ROI. Only targeted subsidies, tax breaks, could make these industries compatible.
Obviously, to keep employment in functional working limits in these new economic conditions small and medium businesses and investors should be setup to be finance-able on a low interest rate; Monetary quantities should be enhanced to accumulate if SMB and SMI expand their market-share and ”equity” approaches alone with targeted subsidies should help the balance. The market security should be considered number one priority.
© Joshua Konov, 2009
SEE Market Economy under Rapid Globalization and Rising Productivity http://ideas.repec.org/p/pra/mprapa/48750.html
by JACOB GOLDSTEIN
After falling during the recession, the number of Americans with full-time jobs increased last year.
But median earnings for full-time workers fell. (Also: The wage gap between men and women did not change.)
And household income was stagnant across the income spectrum.
These figures, from a Census Bureau report released this morning, aren’t surprising. But they are a reminder of the fact that, while high unemployment remains a big problem for the U.S. labor market, it’s not the only problem. There’s also a long-term stagnation in real earnings for people who have jobs.
On a less-grim note, the report also found that the percentage of Americans without health insurance fell last year. Here’s more on that.
Social and Infrastructural Expenses to Help Balancing Markets i.e. Economiessocial expenses include social benefits, pensions, educational, unemployment expenses market equals economy, economic
Market Economics is about Demand and Supply (it is not an error of the Supply and Demand of the past) of goods and services that have gone Global, which complicates the ways Economics explains these processes. Some market sectors have become less Nationally dependent than Globally such, therefore the inflationary forces could not be explained anymore in a closed marketplace as it was before. The ongoing Globalization, the rising Productivity, and the Chinese Industrialization have accelerated the up mentioned processes that have given the opportunity to many markets to develop into not industrial production related market sectors without prompting necessarily Inflation, whereas the Deflation instead have become bigger issue.
The foundations of current Economics has been less or more a Socialized Capitalism, which lays on the Industrial production. The most developed markets are called Industrialized Economies. However, the most recently expanding Global capabilities of industrial overproduction has invoked the needs for reevaluating Economics and finding ways for Fiscal balance by not accenting on industrial production and industrialization: the most common method is by imposing high taxation. Social and Infrastructural Expenses have become a main tools for rebalancing market demand to supply: however, high National debt run by the most developed countries, but China, has undercut the abilities of governments to continue such policies; Neo Liberals, Big Business and Investors have put political pressure on these governments to reduce Social and Infrastructural expenses. The situation with less developed and undeveloped markets is even worst because of their dependence from their debt holders: the World Bank, European Union, IMF, WTO, which serve their lenders and apply constant pressure to prevent these countries from adding more debt to the already accumulated such.
The unorthodox approaches in Economics by China to use their public sector and stimulus packages for improving consumption have proved productive, as well the Abenomics and the US Quantitative Easing have had. The indifferent European Union orthodox approach has proved a disaster. All of these are good profs for the changing Global markets’ realities and the need for action by the “Invisible Hand” to re-balance markets under these new arousing realities.
However, the market interventions by governments or international financial institution may finally backfire and prompt new recessions if the ongoing processes are not properly apprehended and long term policies are not implemented. Policies that can boost market development i.e. Economic growth must prevent from bubbles and major market imbalances. Whereas the Social and Infrastructural are market tools to be used for maintaining markets’ balance they also could be used to prompt market development by targeted capital injecting into Market Leaps without prompting Inflation. If properly executed such Market Leaps could accelerate business and investment activities in these particular market sectors. What is necessary before using these market tools is a detailed evaluation of this market overall abilities to absorb such expansion of consumption and business. Market Economics is an “as it comes, as it goes”’ approach in Economics that tolerate the usage of all market tools to expand and manage market development, therefore, if Social and Infrastructural expansion could prompt employment, consumption and business activities without excessive Inflation, than such approach is considered appropriate. The Uncertainty Principle and the Probability Principle are used for simulations of Market Leaps and prevention of Bubbles. Market Tools are used as parameters for maintaining relative fluency. Parts Market Equilibriums are used to maintain General Market Equilibrium. (SEE the related Papers and Articles).
The Market Economics considers Social and Infrastructural Expenses to certain percentage as equity: such change is made possible by the Globalization and rising Productivity, which allow some extra consumption and business activities balanced by the globalized markets overproduction. Even partial equity such expenses are supplementary approach toward Market Development that that supports the main production and services based approach. Social and Infrastructural Expenses could have a good use for fighting deflation (example for such is Japan).
The percentage of equity Social and Infrastructural Expenses reflects the market’s success in adapting the principles of Market Economics, not that much the level of Market Development i.e. Economic Development. An open market with adapted Rule of Laws: Contract Laws, Consumer Protection Laws, Environmental Laws, Intellectual Property Laws, Insurance & Bonding Laws may well be suitable for using such expenses to start a Market Leap, even though this market i.e. economy is not developed in compare to the most developed markets.Joshua Ioji Konov 2014