Why Is It Advantageous for a Modern Employer to Fire Employees - Essay Example

Political Economic Questions:Analysis of an Economics-Related ArticleSynopsisThis paper takes a critical analysis approach toward assessing an article from the Sydney Morning Herald in January of 2007. This article describes various business-related situations, focusing primarily on risk, and addresses the impact of business activities on the employee and local citizen. Various political economic concepts will be discussed to shed light on this article's proposed risky business assessments.

Political Economic Questions:Analysis of an Economics-Related Article The article entitled "Risky business, but not for the boss", by Ross Gittins, describes the elements of risk, both from a business perspective and that of the average employee and local citizen. Three specific activities are mentioned in the article, with the emphasis on the contemporary tendency of modern business to shift risk-related expenses away from the company and onto the employee. These risks include the offering of superannuation to employees, inventory and production, and the full-time versus part-time workers.

The article discusses "longevity risk" (Gittins, 2007), which entails a company's willingness to provide contribution to retirement and pension accounts. Historically, companies contributed more, however, today employees are expected to make financial arrangements (outside of high company contributions) which will sustain them long-term. This reflects a changing attitude on behalf of today's large companies, which are focused on eliminating expenses associated with business operations and long-term employee compensation.

Marxist economic theory focuses on the growth of big business and its 'relentless drive for capital accumulation' (Kang, 2006). Under Marxist economics, free market capitalism is affected by the labourers who bring these companies increased growth and revenues. Shifting risk to the employees satisfies corporate profitability objectives, which could lead to more social and community improvements, however, long-term the impact on the political economic landscape is immense. When these individuals reach retirement age, they will have fewer finances available, due to corporate risk-shifting practices, leading to decreases in consumption.

In this instance, governmental intervention is required to ensure that these employees maintain a significant retirement income so as not to upset the balance of supply and demand which keeps the Australian economic system afloat. The article further discusses the use of part-time workers, as a means to replace the expense of full-time labourers. Part-time workers can be terminated at will, making them a less risky long-term investment for today's firms. Under the Keynesian economic theory, it is argued that firms will choose to lay off workers rather than decrease total staff wages, however, since few people want to work at a low wage or as part-time labourers, this increases unemployment in the long-term (Boyes & Melvin, 2006).

With businesses attempting to reduce payroll costs, this is an indication that these decisions maintain short-term gains for the company, but long-term detriment for the macroeconomic landscape. The article offers a trend of today's businesses in keeping inventory levels low under a just-in-time system, preventing the absorption of costs associated with housing and insuring inventory levels. Historical business habits were to stockpile inventories in the event of a future financial or demand crisis, however today firms are more likely to layoff workers than to build excess inventory.

As companies lay off workers, this also creates a rather long-term problem for the economy as more and more individuals do not have the financial resources to consume products. Under Neo-classic economic theory, individuals work to maximise their personal satisfaction (utility), but firms try to maximise profit. A business which lays off workers in the pursuit of building profitability minimises worker utility, making them less motivated to contribute to economy. This article focused primarily around the corporate tendency to build capital, while dismissing the short-term needs of their employees.

Negative, long-term consequences are the most likely end result, with reduced employee utility, reduced economic benefit for employees, and less financial resources for product consumption. Governmental entities must intervene when big business makes decisions which causes potential problems to the stability of the economy, however it is likely difficult to determine where problems will occur until it has already happened. For instance, corporate decision-making focused on profit-building will likely, over a long period of time, erode the economic stability of the region as employees are impacted financially.

It is the responsibility of government and politics, under any economic theory, to monitor and assess how businesses perform and their role in securing a more efficient economic system which includes the activities of business, labourers, and general citizens. BibliographyGittins, Ross. (2007). Risky business, but not for the boss, The Sydney Morning Herald.Kang, Yu. (2006). What is Political Economy. http://www.freewebtown.com/leeyukang/What%20is%20Political%20Economy%20(2006).ppt#1. [accessed 28.3.2007].Boyes, W. & Melvin, M. (2006). Economics. 6th ed. Houghton Mifflin Company, p.384.