Great Recession and Job Market - Research Paper Example

Great Recession and Job Market There are no areas in our social life which escaped from the negative impacts of the recent financialcrisis. Some economists are of the view that the recession period is over and the economies in the world are slowly coming back to its growth phase whereas others are of the view that the world has not fully recovered from the recession problems yet. Many of the prominent organizations both in America and in other parts of the world were collapsed as a result of the depth of the injury caused by the current recession. Moreover, many other organizations forced to cut down their expenses and as result of that many people lost their employment and many others suffered salary cut downs. Because of the huge advancements in technology and the subsequent developments in industrial sectors, it is a fact that job openings are huge in number in many parts of the world. America and Europe are regions which are facing severe manpower shortages in the employment market. For example, the majority of the nursing professionals working in America and European countries are from India, Pakistan or Philippines like countries where manpower resources are surplus. Moreover, America is currently outsourcing a substantial portion of their jobs to Asian countries because of skilled manpower shortage. According to a study, “More than 1.3 million additional Western jobs will vanish by 2014 due to "the accelerated movement of work to India and other offshore locations” (Statistics Related to Offshore Outsourcing). Jacob (2011) has pointed out that “There are millions of Americans that have not been able to find a full-time job even after searching hard for an entire year" (Jacob) At the same time, it should be noted that the current recession was not much serious when we compare it with the Great Depression in the decade preceding WW2. However, one of the surprising facts is that unemployment problems were not much severe during Great Depression as in the case of current recession. “The unemployment rate in the United States was last reported at 9.1 percent in September of 2011. From 1948 until 2010 the United States' Unemployment Rate averaged 5.70 percent” (United States Unemployment Rate). In short, both Great Depression and current recession affected the employment market differently. During Great Depression many graduates were able to land a job due to the scarcity of qualified workers, but in the current Great Recession, there is an abundance of college graduates and the demand for them has gone down immensely because of the availability of cheap labour in other parts of the world in this extremely globalized world. During Great Depression, the number of qualified people was less in number whereas the demand for qualified people was more. In other words or in terms of economics, supply of labour force was not adequate to meet the demands during the Great Depression period. It should be noted that industrial revolutions were taking place across the world during that period and therefore job openings in the manufacturing sector was huge. Population size was not so big during the Great Depression period compared to that in the current Great recession period. Moreover, people were not much interested in getting college education during Great Depression period, as they do now. In short, smaller population size and smaller literacy rates helped the qualified people to find suitable employment during the Great Depression period. However, the case is entirely different during the current Great Recession period. “The growing population in the country has led to the ratio or percentage of unemployed to increase. It has to be taken into notice or consideration that jobs do not increase with the increase in population” (About Reasons for Unemployment in The US). Even though population growth rates in America are comparatively low to the standards of some other countries, it is a fact that employment opportunities in America is not growing as fast as the population is growing. Moreover, a substantial portion of the jobs created in America labour market is captured by the foreigners and therefore the available job openings for the domestic workers are considerably low. In the 1930s there was the TVA--but no TV, and, of course, no Internet. More than half of the predominately-male, overwhelmingly-white sample surveyed in a series of polls in 1936-37 by the then-new Gallup organization had average incomes or better. But 46% had no telephone, 43% lacked a car, and 38% still preferred the old black-and-white movie variety to color (The Great Recession vs. The Great Depression). Because of the inferior facilities and traditional philosophies about life, people were willing to accept any kind of work during Great Depression period. However, current generation is entirely different. Many of the teenagers coming out from American colleges at present are rejecting many of the initial offers they are receiving. Even a fresher likes to have a managerial position. They are not ready to climb up the organizational ladder steps from one by one. Everybody wants to start their profession from the top of the organizational ladder. University of Connecticut President Michael Hogan has recently asked the students to practice saying YES more frequently than saying NO to job offers. “Saying yes begins things. Saying yes is how things grow. Saying yes leads to new experiences, and new experiences will lead to knowledge and wisdom” (Peck). The current cost of living in America is huge when we compare it to the statistics of other countries. The life philosophies and attitudes of lavishly spending current American people are entirely different from that of Americans during the Great Depression period. Americans spend more than what they earn now whereas the Americans in the 1930’s had better saving habits. During the Great Depression, the Consumer Price Index (CPI) stood at 17.3 in October 1929, reached a bottom of 12.6 in May 1933, stayed around 13 or 14 for the remainder of the 1930s, and did not reach 17.3 again until April 1943. In comparison, the CPI was at 216.573 in October 2008, fell a handful of points through 2009, and regained its footing to 218.178 in May 2010 (Benzinga) The above statistics clearly indicate the variations in consumer price index during the depression and recession periods. Current generation is not much bothered about the prices of the products they are purchasing because of their lack of interests in saving money whereas the people during the Great depression period gave more importance to savings rather than spending. Because of the above differences in life philosophy the readiness of the people in accepting challenging jobs in during the depression period was more than that of the current people. Moreover, because of the differences in spending habits, current Americans may require more salary than the Americans in the Depression period. In short, current Americans are reluctant in accepting all the jobs come in their way compared to the Americans in the past. Current Americans are getting a substantial amount of money in the form of social security benefits whereas the Americans in the past failed to get any such benefits. Current unemployment benefits will give more benefits to a person than the benefits offered by an ordinary job in America. Consider, for example, an unemployed person who is accustomed to making $15.00 an hour. On unemployment insurance this person receives about 55 percent of normal earnings, or $8.25 per lost work hour. If that person is in a 15 percent federal tax bracket and a 3 percent state tax bracket, he or she pays $1.49 in taxes per hour not worked and nets $6.76 per hour after taxes as compensation for not working. If that person took a job that paid $15.00 per hour, governments would take 18 percent for income taxes and 7.65 percent for Social Security taxes, netting him or her $11.15 per hour of work. Comparing the two payments, this person may decide that an hour of leisure is worth more than the extra $4.39 the job would pay. If so, this means that the unemployment insurance raises the person’s reservation wage to above $15.00 per hour (Summers). During the Great Depression period, such social security benefits or unemployment benefits were not in place and therefore the necessities of employment was more. Outsourcing or offshoring like revolutionary business concepts were not there during the depression period. Therefore, Americans got employment because of the growth of business and industries during the Great Depression period. However, America is losing thousands of jobs in the form of outsourcing and offshoring at present. The job which may cost $ 10000 in America can be executed in India for about $ 5000. In short, huge differences in labour costs forced American organizations to think in terms of outsourcing their jobs to India like countries at present instead of executing it domestically by giving employment to the unemployed people. “Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business” (The Advantages and Disadvantages of Outsourcing). In a heavily globalized world, no organization can concentrate only on internal factors alone for maximising its competitive power. In fact external factors are more important for an organization while formulating business strategies at present. Globalization brought many changes in business circle in this manner and cost cutting seems to be an inevitable business strategy. The intrusion of cheaper Chinese products are causing huge problems to American companies and as a result of that American companies cannot think in terms of utilizing the expensive domestic labour force while usable cheap labour forces are available at other parts of the world. At the same time, it should be noted that threats from external sources were not there during the depression period. Therefore, American organizations were able to concentrate only in the domestic markets and therefore no job loss occurred to the domestic job market. From the perspective of a laborer competing in the labor market, the value of a dollar with 20% unemployment is considerably higher than the value of a dollar with 5% unemployment. This type of interplay between consumer goods and the unemployment rate in a free market would appear to suggest that as a society or a labor force gets leaner its market for goods should get leaner as well (Benzinga). The above statistics clearly suggests that the value of the dollar during depression was much more than that during the recession period. In other words, the goods possible to purchase with one dollar during the depression period was much more than that can be purchased now with the same one dollar. Thus people during the depression period valued money very much whereas the current generation do not have that much concern about the value of money. “Frequent concomitants of inflation, such as high interest rates and volatility and uncertainty in the financial and product markets, increase the risks inherent in business operations and thereby discourage the expansion of firms and the creation of jobs”(Block). Inflation is a scenario in which the prices of all the goods and services increase for a particular period of time. Inflation always prevents employers from job creation. So, in order to reduce unemployment problem, government should try to reduce inflation as much as possible. It should be noted that inflation was much lesser during depression period compared to that in the recession period and therefore employers never stayed away from job creation during the depression period. Professor Mohanbir Sawhney of Northwestern University's Kellogg School of Management, a self-proclaimed "big believer in total disaggregation," says: "One of our tasks in business schools is to train people to manage the virtual, globally distributed corporation” (The Future of Outsourcing). American educational system and business schools were succeeded in creating more professionals at present. It should be noted that the professionals emerging out from colleges were less in number during the depression period. In other words, the supply of professionals was less than what was required during depression period. Cross cultural business is growing day by day and Americans failed to exploit it properly because of the loopholes in their educational system. For example, learning of a second language is not compulsory in American schools whereas in India like countries all the children should learn at least three languages- national language, local language and English- in order to complete their school education successfully. In short, foreigners have awareness in more than one language and therefore they can exploit international labour market more efficiently than Americans who know English only. At the same time it should be noted that during depression period, the dominance of English as the international language was unquestionable and therefore American professionals faced little threats from external sources. Public sector jobs are more attractive than private sector jobs at preset; however, American government is slowly withdrawing currently from the labor market because of globalization. Thus public sector job openings are declining in America. As mentioned earlier, the rising of India and China as prominent players in the global employment market, caused several problems to the job generating abilities of the government. At the same time such threats were not there during the depression period and government actively participated in the employment generation activities along with the private sector. “Businesses pay more taxes in the United States than just about anywhere else in the world. This means many businesses are literally pushed out of the country, and with that, jobs too vanish” (Jacob). Along with the rising labor cost, rising tax problems also preventing American companies from domestic job creation at present. It should be noted that many of the American companies already reached a saturation level in America and it is difficult for them to develop further in America. However, during depression period, no American companies experienced any saturation and job creation in American soil was never interrupted. “More and more US companies are automating their production facilities. Hence, people are replaced by machines, thus leaving a huge pool of people unemployed. This is known as Technological Unemployment” (About Reasons for Unemployment in The US). The advancement in technology is a blessing in many ways; however, it causes some problems in the employment market at present. The aim of technological advancement is to reduce the human efforts considerably. Thus, whenever a new technology enters the market, a considerable amount of job openings disappear. For example, before the introduction of internet and computers, people used typewriters for preparing documents. The introduction of computer made document creation an easy task and therefore many of the clerical staffs lost their jobs. America is a technology savvy country in which the influence of machineries are growing day by day. In fact robots are used in many American organizations for doing complicated or precision work. Thus the intrusion of technology caused several cut down of jobs in the employment market during the recession period. However, during depression period, technological advancements or machinery use were not up to the current level and the necessities of human effort was inevitable. To conclude, many graduates were able to land a job due to the scarcity of qualified workers and increased job openings during Great Depression. In other words, demand for qualified professionals was more than the supply during Great Depression. At present or during the current Great Recession period, the case is entirely opposite. Now the demand for labour force is less than the supply. Population size increased a lot whereas industries started to exhaust because of recent recession. Moreover, globalization has brought many challenges to the job market. Outsourcing and offshoring like current business strategies are causing severe problems in the employment market in America. Life philosophies of the current generation are undergoing drastic changes and they give more importance to enjoyment rather than hard work. In short, unemployment problems during Great Recession period were more than that in the Great Depression period mainly because of the differences in supply and demand of labour forces, changing life styles of the people, increasing population size, changing business concepts etc. Works Cited “About Reasons for Unemployment in The US”. 1997. Web. 01 November 2011. Benzinga. 2011. “The Great Depression vs. the Great Recession” Web. 01 November 2011. Block, Farrell E. “Unemployment: Causes and Cures”. Web. 01 November 2011. Jacob, Jijo. “Top Five Reasons for High Unemployment in US”. 2011. International Business Times. February 9, 2011. Web. 01 November 2011. Peck, Don. 2010. “How a New Jobless Era Will Transform America”. Atlantic Magazine. March 2010. Web. 01 November 2011 “Statistics Related to Offshore Outsourcing”. 2010. Web. 01 November 2011. Summers, Lawrence H. “Unemployment”. The concise encyclopaedia of economics. Web. 01 November 2011. “The Future of Outsourcing”. 2006. BusinessWeek, JANUARY 30, 2006. Web. 01 November 2011. “The Great Recession vs. The Great Depression”. 2010. Web. 01 November 2011 “The Advantages and Disadvantages of Outsourcing”. 2009. Web. 01 November 2011 “United States Unemployment Rate”. 2011. Web. 01 November 2011. Read More