Three Reasons Companies Move Jobs Either to or from the USA - Assignment Example

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Companies in the world relocate and move jobs and other business operations from one country to another country. These typically moved operations might involve operational process such as the manufacturing of goods with their consumption market being predominantly in the USA. …
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Three Reasons Companies Move Jobs Either to or from the USA
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Download file to see previous pages The USA, being the world’s biggest economy, does not operate in isolation and effectively companies have moved jobs out and into the country. Conversely, there are different reasons for companies to move jobs out and into the country. While the key reasons for companies moving jobs out of the USA range from labor arbitrage and avoidance bureaucratic regulations, companies moving jobs into the country cite high inflation on wages as the main reason of moving their plants and operations back to the country. This expose therefore elucidates three reasons companies move jobs either from or to the USA.
One of the reasons that companies move their jobs overseas, especially the manufacturing processes, is to take advantage of lower wages abroad especially in poor countries. Labor arbitrage is the process of taking advantage of lower wages in any type of business operation (“Moving back to America”). China is one of the countries that offer cheap labor and essentially companies from the USA move their manufacturing plants to the country in order to lower the cost of production and improve their profit margins. A study conducted in 2002 to determine the manufacturing industry’s compensation of workers in China, showed that factories in China labor compensated their employees 64 cents an hour. In comparison, the same study found out that a similar compensation in the USA job market stood at $21.11.
In this case, companies with manufacturing plants in the USA would want to take advantage of the low labor wages in China and in other countries offering cheap labor. It is crucial to note that companies expect to have a high return on investment (ROI). In effect, one way to ensure that they achieved this objective is through a reduction in the cost of operation. Therefore, cheap labor ensured that the cost of operation remained low and therefore companies achieved the objective of having a high return on investment. However, the USA job market does not offer cheap labor, as most companies would like. While the study only covered the hourly-wages only, a further study with scanty data available in China indicated that this figure of 64 cents rose to $1.06 when considering other benefits and insurance (“Just How Cheap is Chinese Labor?”). This figure is still relatively low in comparison to the USA labor and explained company’s preference for the Chinese labor market. Labor arbitrage might be the main reason that American based companies cut their workforce in the country in order to expand abroad in the 2000s. In this regard, the Chinese job market witnessed 260% additional jobs by America based companies that translated into 943,900 jobs since 1999 to 2009 (Wessel). In this case, it is imperative to point out that cheap labor might be the key reason that attracted these multinationals to the Chinese job market. To prove this point, these US based multinationals decreased their job levels in Germany by 2% while jobs in the UK and France labor markets increased by 8% and 2% respectively (Wessel). It is crucial to note that, the same study that showed the average labor wages for china as $1.03 showed that he same wages paid to a factory worker in these three countries averaged $14.22 (“Just How Cheap Is Chinese Labor Market?”). The availability of cheap labor is not the only reason that makes USA based ...Download file to see next pagesRead More
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