Effects of Rising Economic Role of China on High Levels of Unemployment in the EU and USA - Essay Example

? Economic strength in China and its effects on continued high levels of unemployment in the European Union and USA Supervisor: Date: April 4, 2013 Economic strength in China and its effects on continued high levels of unemployment in the European Union and USA Introduction Effects of globalization have been significant in different regions of the world, both negative and positive. China has for example emerged to be an economic giant while western countries have continued to suffer from high unemployment rates. I, in this paper, explore the opinion that rising economic strength in China will result in continued high levels of unemployment in the European Union and the United States. Trend in China’s economic growth The trend in China’s economic growth is one of the indicators of the effects of its economy on unemployment rates in the European Union and the United States. China has continually expanded its economy and its exports, a factor that has undermined manufacturing activities in other countries (Carbaugh 2011, p. 23; Dpcdsb n.d., n.p.). Existing data on China’s economic indicators indicates this. In 1995, for instance, China’s GDP was at about 7000 with an estimated export value of about 820. The two variables have gradually increased to report a GDP of almost 33090 and an export value of about 5180 in the year 2007 and the increasing export is an indicator that some countries rely on China’s exported product. This identifies dormancy of the dependent countries and a consequence of unemployment that could have been remedied by production industries in the recipient countries. China’s access to European Union and the United States’ market will therefore increase the region’s unemployment rates, especially with the past trend in China’s growing exports (Dai 2011, p. 89; Yao 2011, p. 53- 55). The observed trend in China’s economic potentials, as shown in appendix 3, and 4, further shows that China’s export will increase to have adverse effects on other countries and the European Union and the United States are likely to depend more on the exports and suffer higher rates of unemployment (Trading Economics 2012, p. 1). Causes of high unemployment rates in the European Union countries Possible effects of China’s economic strength on unemployment rates in the European Union states and the United States can also be explored by understanding the primary causes of unemployment in the two regions because a review of factors into high unemployment rates in the region identifies vulnerability to a foreign economic force. The European Union states regulate their labour market and this influences unemployment rates among the Union’s states. Carbaugh explains that the level of inflexibility in a country’s labour industry is directly proportional to the country’s unemployment rates as employers manage regulatory constraints to ensure their fair share of profit. Laws for protection of employees’ rights and minimum wage laws are legal factors in the region that force employers to resort to alternative cost cutting strategies such as reducing number of employees. Strong labour unions also force pay and initiates similar counter measures into high unemployment rates as employers struggle to balance their expenses. The relatively cheaper exports from China will however offer a more profitable venture and paralyse the regions’ production industries to increase unemployment rates (Carbaugh 2010, p. 257- 259). The types of unemployment that are significant among the European Union countries further identify microeconomic factors into the region’s high unemployment rates. “Frictional, structural, and seasonal unemployment” mean that economies are not flexible enough to align their human resource potentials with their dynamic labour markets. Payments for unemployment benefits in the region also accounts for significant rate of unemployment because people do not feel a mandatory need for work and may not make necessary efforts to gain necessary skills for the job market and these will continue to pose adverse effects to the regions’ production sectors. The consequence will be an opportunity for exports that will worsen the unemployment rates (Hall and Lieberman 2007, p. 551-554; Gupta 2008, p. 392). The nature of policies in controlling unemployment rates further identifies weak or inappropriate policies, as a major cause of unemployment in the European Union states. This is because appropriate policies could reduce the state’s minimum wage rates and allow employers to adjust their human resource bases. The states could similarly enforce laws that promote flexibility in the relationship between wage rates and demand and supply in the labour market. Further, policies for regulating macroeconomic fluctuations can control unemployment due to seasonal economic factors. Failing to identify proper economic policies for reducing unemployment rates may further impair production processes and force reliance on imports from economies like China. This will however increase unemployment rate due to lost jobs in the domestic production sectors (University of North Carolina n.d., p. 1). USA’s ability to exploit its natural resources, and invest in education and technology for generating business activity and employment The United States reports a high level of technology awareness and application among its business entities and a continued exploration of new technologies that are target specific is likely empower the country to a higher level of business activity and higher employment rates. This will esteem the nation to counter China’s economic force and ensure sufficient domestic productions. Effects of technology can also will increase productivity output and create demand for labour (Gitman and McDaniel 2008, p. 7-9). Academic qualification in the country also identifies empowered human resource that can add value to the country’s business activities and even find jobs in foreign countries. This is because of the high number of post secondary school graduates that the nation realizes every year. In the year 2010, for instance, about 18 millions students graduated with bachelor degrees, almost 700000 graduated with masters and more that 150000 attained their doctorate degrees. A significant percentage of these qualifications in business fields show the nation capacity to generate more business and employment opportunities and export its surplus labour and utilizing the nation’s human resource potentials is likely to shield it from global forces towards higher unemployment rates (Institute of Education Science n.d., p. 1). The United States is however poor in natural resources and heavily relies on imports for its production processes that utilizes natural resources and may also for the nation to import finished products from nations like China. It can therefore only rely on technology and education to enhance its business activities and reduce its unemployment rates but is under significant threat to suffer from unemployment effects of globalization with China as a potential factor (Miller and Spoolman 2011, p. 360- 361). Conclusion China continues to expand its economy that is dependent on exports while the European Union states hold on to their policies that have in the past increased their respective unemployment rates. The United States, though with advantages in education and technology, lacks sufficient natural resources that can empower its economy to resolve unemployment. The rising economic strength in China will therefore promote exports to the two regions to worsen the regions’ high unemployment rates. Reference list Carbaugh, R 2010, Contemporary economics: An applications approach, M. E. Sharpe, New York. Carbaugh, R 2011, International economics, Cengage Learning, Mason. Dai, M 2011, Innovative computing and information: International conference, ICC 2011, Springer, Suzhou City. Dpcdsb. International interdependence: Advantages and disadvantages of international trade, Dufferin-Peel Catholic District School Board, Retrieved April 4, 2013, < http://www.dpcdsb.org/cec>. Gitman, L and McDaniel, C 2008, The future of business: The essentials, Cengage Learning, Mason. Gupta, G 2008, Macroeconomics: Theory & application, Tata McGraw-Hill Education, New Delhi. Hall, R and Lieberman, L 2007, Economics: Principles and applications, Cengage Learning, Mason. Institute of Education Science n.d., The condition of education, National Center for Education Statistics, Retrieved April 4, 2013, < http://nces.ed.gov/programs/coe/overview.asp>. Miller, G and Spoolman, S 2011, Living in the environment, Cengage Learning, Belmont. Trading Economics 2012, China exports, Trading Econonics, Retrieved April 4, 2013, < http://www.tradingeconomics.com/china/exports>. University of North Carolina n.d, Unemployment, Euroeconomics, Retrieved April 4, 2013, < http://www.unc.edu/depts/europe/euroeconomics/Unemployment.php >. Yao, Y 2011, ‘The relationship between China’s export-led growth and its double transition of demographic change and industrialization,’ Asian Economic Papers, Vol. 10, No. 2. pp. 52-76. Appendix Appendix 1: Trade volumes 1987- 2008 Appendix 2: Percentage of export in GDP, 1987-2008 Appendix 3: Trend in China’s exports Appendix 4: Trend in China’s GDP Appendix 5: Percentage of China’s export as a percentage of GDP Read More