Transcript The New Economy: Working Around the World and Around the Clock

The New Economy:
Working Around the World and
Around the Clock
The Post-Industrial Economy
and US workers in a global
capitalist world
What is a critical issue?
• It’s NOT a FACT
• It is a JUDGMENT, an opinion
• By definition, “critical” means
– Decisively important
– Changes the course of events
• What would be good criteria?
– Affects many people
– Intensely
– Long duration
– Dollar cost
Critical Issues in the Economy
• The Debt – foreign, national, budget
• Productivity (in the 1980s…)
• The growing price of oil and the growing
demand
• Layoffs and unemployment
• MAX 123 will focus on layoffs and
unemployment
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What are the key types of
corporate decisions leading to
layoffs?
To downsize
To outsource/To offshore
To acquire/merge
To restructure
LAYOFFS & UNEMPLOYMENT– THE
NUMBERS AND THE FACES
The United States has lost almost 3 million
jobs since January 2001.
True or False
TRUE
Which sector has lost jobs; which
sector is increasing?
a. Manufacturing is growing; services
are shrinking
b. Services are growing; manufacturing
is shedding jobs
c. Manufacturing and Services are
losing jobs; shepherds and cattle
wranglers are growing
b. Services are growing;
manufacturing is shedding jobs
What Percent of Manufacturing
Jobs have been lost over the past 5
years?
a. 5%
b. 10%
c. 20%
What Percent of Manufacturing
Jobs have been lost over the past 5
years?
c. 20%
**2.8 million jobs in the last 3 years
**10,400 jobs here in CNY (1:5) in last 4
years
A local story of job loss:
http://www.news10now.com/content/top_stories/default.asp?ArID=36775
Other sectors are also experiencing
job loss and people are remaining
unemployed longer…
Long term unemployment has increased:
manufacturing sector = 259%
information industry = 354%
professional & business = 285%
Natasha’s Story
•
Santa Clara, California Natasha, 31, was earning
$90,000 a year with handheld computer maker Palm.
After being flown to India to train people whom she later
realized were her replacements, and despite promises
made by Palm, Natasha was subsequently laid off.
•
Her Story
I was earning a comfortable living at Palm. When the
company began to reorganize—laying off American jobs
and sending them offshore—I never thought my position
was in danger. I was told repeatedly before training my
Indian team in Bangalore that my job safe. Then I got
laid off.
The thing that frightens me most is the talk of
outsourcing ultimately benefiting the American worker.
Though we’ve been sending low wage jobs off shore for
years, we have no historical reference for the effects of
upper-level positions being off-shored. The economy is
not going to absorb people who used to make six figures
as it did with low-paying jobs—so many people in
California are working for fractions of their former wages.
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Effects of Worker Lay-offs
• PRIMARY EFFECTS
– Employees lose wages, benefits, pensions
– Supplier loses contracts
• SECONDARY EFFECTS
– Retailers lose business
– Gov’t loses corporate and income tax revenue
• TERTIARY EFFECTS
– Lay-offs in other sectors
– Increased demand for Gov’t services
– Charitable giving reduced
Understanding the Cases –
The Big Picture
• Is this round of lay-offs simply the down
cycle?
• Are there precedents for massive jobs
shedding in American history?
What enables firms to produce
more with fewer workers?
Techno-Innovations:
heightened productivity (of labor)
Greater efficiency  fewer workers
needed
In what sectors will business tend invest in
new technologies?
Where wages are highest
Massive shift in Economy's center
of gravity
• Manufacturing  Service Work
– measured in employment
– measured in share of GDP
• Income Consequence: Manufacturing
pays well; (Most) of Service is low-pay
Technology of Globalization
1. Innovations in cyber-technology
• the internet - satellite communications
• transmission of information
2. Innovations in tanker & jet transportation
Expedited conveyance of people and
goods
3. Automated electronic financial systems
• Transfer of money
Effects of Global’zn on Labor
• High Skilled: Outsourcing
– Wage Rate differential for computer
programmer 8:1
– responsible for only 2.5 % of lost jobs
• Low-Skilled: Immigration
• Everybody: Plant Relocation
Effects of Global’zn on Biz
• increasingly competitive (global) markets 
shrinking profit margins
• Can't raise prices
• Therefore, cut costs
- Lay off workers
- Reduce effective wage rates
Biz Demand for Better Biz
Climate
• Low wages, low benefits
• No labor militancy
• Low corporate taxes
– Better yet, tax abatements
– Taxpayer subsidies
• Little regulatory policy
– With respect to environment
– With respect to workers (occupational health
and safety, collective bargain protected)
• Limited social safety net
Creative Destruction:
The Churn
• Technological innovation engenders a
churning and creative destruction that
yield economic growth and creation of
new jobs -- more new jobs than lost jobs - In the long-run.
• Productivity increase 11X since 1870
• US workforce hasn't decreased
• Same principle applies to free trade in the
global economy, as we'll see next week.
comment
• The liberty to innovate, to exercise initiative, to
show enterprise to close a plant in Syracuse and
outsource financial services to Singapore
creates wealth -- even as it has significant
adverse social impacts.
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Those that suffer the adverse effects of
"the churn," those who are the victims of its
"creative destruction" are seldom the same
people who benefit fully from its creation of
wealth.
The Question:
• Should the rewards of wealth creation and the
liabilities of the "creative destruction" be socially
distributed entirely as the market dictates?
• Do you believe that fairness demands we
impose some restraint on entrepreneurial
liberty?
• Alternatively, should those victimized be aided
and compensated in some measure? And if so,
according to what principle?