Advantages and Disadvantages of Opening Labor Markets on a Global Scale - Coursework Example

Advantages and disadvantages of opening labor markets on a global scale Introduction With the massive wave of globalization in the recent years, it has led to the widening of worldwide flows of goods, services and people engaged into different processes, related to the business matters. Modern technologies have opened new possibilities for transformation of communications by the quickness and density of information flow, in particular via the internet and the mass public. Due to the rapid changes in the global economy, there emerged transformation of financial markets that produce greater economic interdependence between states and the way the world exports its goods and services (Norris, 2000). In the present time, more companies became able to perform their operations on the global scale, placing each business stage of production in the country where it can be done with the least expenses and with transmitting of ideas for their new products around the globe (Hanson, 2001). Demand for different goods and services determined employment in numerous industries, enabling companies to increase production of goods and services, however, making obsolete various methods for producing goods and services. With the investigating and examining of the past availabilities along with the possibilities that modern global scale gives enterprises, it is possible to project changes in relationships between companies, its resources and outcomes in order to predict the future labor markets (Hall, et al, n.d.). The following paper will illustrate the advantages and disadvantages of how opening labor markets can influence the global scale. Advantages of opening labor markets globally Globalization drives the opening labor markets. While in the latest years employees in China India and former Soviet Union entered the global labor market, they also brought their economies to the global system of production and consumption of products and services. In 2000, these countries contributed more than one billion workers to the global labor market, doubling the size of the present world workforce. With the entering to the global economy, new capital was also appearing, which can be considered as the advantage for opening of labor market with regard to the global scale. However, with the quantity of twice as many workers and the same amount of capital places, there appeared also great pressure on labor markets throughout the world (Hall, et al, n.d.). Despite that fact, most college graduates were likely to be more accessible to obtain job rather than manufacturing workers who came from the other country. From that standpoint, there is a gap between companies’ potential to hire labor on the offshoring rights and the opportunity to increase the rate of employment. Policy makers on the supply side will be able to understand the reasons of companies to offshore and their requirements from an offshore location. Along with that, they will be able to tailor companies’ offerings (Farrel, et al, 2005). Opening labor markets, it makes companies possible to employ specialists of different speciality. Thus, due to the increase of globalization and discoveries in technology, it is easier for software companies to outsource talents on a global scale. Here a certain advantage of opening labor markets appears, because the cheaper and equally effective laborers are perfect sources for the burgeoning software market especially if they are located in the less developed countries. Allowing such programming and software development outsourced from other countries makes it possible the companies in the U.S., for example, run the risk of losing their core competencies. This tendency is at its start so far, however, while allowing engineers from China and India to perform the coding and implementation of their products, it makes the developed countries to employ more cheaper specialists, which has a long-term effect on the economy of the country. In the manufacturing field, outsourcing and offshoring are still popular forms of labor sourcing (Freeman, 2008). Opening labor market is the key to globalization. In terms of Asian countries, companies located in Japan, for instance, should open up their closed labor market in order to undertake equivalent to a cultural revolution that would allow its people to have more opportunities for work and development. Whether Japanese companies use local employees outside Japan, it can lead to complicated conditions in unifying corporate culture. This could also lead to a lack of loyalty from local employees. However, assigning to work overseas, makes Japan to have a strong home bias (Matsutani, 2014). If to take European countries, UK in particular, Britain should be proud of opening its labour market to eastern Europe. First of all, it opened new opportunities for the best talents available in the country to broaden their horizons in different professional spheres. Moreover, the other advantage of the opening the labor market with other countries will help UK to avoid an explosion of squalid and exploitative black market labor in its own towns and cities. Thus, legal migration of one and a half million people to Europe since 2004 is often accused in acting as a recruiting sergeant (Bakehot, 2011). The other benefit of the opening labor market touches the construction, operations and maintenance sphere, which costs of a production facility, can cost half as much as in the U.S. in the developing countries (Hall, et al, n.d.). A big part of the world trade growth starting 1970s has taken the form of trade in intermediate inputs. This also touches a foreign outsourcing as well. For example, the well- known Nike outsources production of its footwear to companies in Asia. Dell outsources production of the components of its computer devices around the world. Here another advantage of opening labor market appears- foreign outsourcing increases the demand for skilled labor at home and abroad. With the changes in the labor map of the world, many challenges of globalization have appeared, making international labor standards more relevant today. International labor standards are about the development an improving of people as human beings. With the achieving of the goal of decent work in the globalized economy, it requires actions at the international level. The world community is responding to this challenge by developing international legal instruments for trade, finance, environment, human rights and labor. The opening labor market set out in international labor standards should be well-thought and applied through a legal system within each country in order to ensure the effective and stable labor market for employees and employers (The benefits of International Labor Standards, n.d.). Opening labor market has its advantages in terms of developed technologies that are more noticeable in the last hundred years. The technology’s impact on labor sourcing and structuring has been more thorough. These technologies have created the whole new markets and new labor models with them. The main tool of a opening labor market on the global scale is developing of databases that are used by multinational companies to have many more strategic posts scattered around the world and which should be monitored by the career development of more managers. Thus, I.B.M. is building a global database that will cover forty thousand competencies and include all employees worldwide who can bring those skills to be able to do certain tasks of the company (Quelch & Bloom, 1999). In today open global markets, movable or not movable concept should be viewed as a graduated scale. Moreover, it should also be reassessed constantly, as there appear a lot of changing circumstances in companies’ and managers’ opportunities. Such concept will encourage many managers to choose different overseas assignments and open the thinking of online resources. In addition, the human resources managers will be able to use available home talents as well. With opening labor market, it will become possible for global networks to transfer knowledge and good practices and run on people-to-people contact at the same time. Disadvantages of opening labor markets globally Cost pressures at the same time makes offshoring potential disadvantage for numerous companies in the developing economies. Instead, companies within developed countries can locate more jobs remotely. Regulatory barriers beyond companies’ control have been held greatly responsible for the slow using of offshoring. However, the research conducted by McKinsey Global Institute (Farrel, et al, 2005) indicates that company-specific barriers are more powerful than regulatory barriers in stopping many companies. Such barriers are processes that are inappropriate for offshoring, managers’ attitude toward offshoring or insufficient scale. The disadvantages for the opening labor market are the unsuitable business processes that are the most important operational issues impeding companies from offshoring. Despite this fact, offshore employment will gradually grow, however, it will bring no considerable effect on labor markets in the developed countries (Farrel, et al, 2005). Besides, it will have less impact on patterns of employment. In the United States, for instance, the share of manufacturing jobs fell by eleven percentage points to twenty- one percent in the previous thirty years in overall employment. To compare with the services jobs, the total number of such jobs in the same U.S. that could be filled remotely in theory, represents now nine percent of total employment rate today. Opening labor markets, however, is in danger due to many of the locations where labor is cheap and tends to be the same where the political state is unstable. Aside from the typical risks that a manufacturing plant could have in the U.S., a plant in China, for example, will also have legal, political, currency and cultural risks (Hall, et al, n.d.). Of course, in many developing and transition economies, a wide variety of workforce is active in the informal economy. Besides, such countries lack the possibility to provide effective social justice. International labor standards can be effective tools in these situations as well. Most international work standards are applied to all employees, including those working under formal work arrangements. These are the categories of employees who work at home, are migrants or rural workers, indigenous and tribal peoples (The benefits of International Labor Standards, n.d.). Among the other disadvantages of the opening labor markets on the global scale is the doubling of all the global workforce which creates challenges for well-being in the advanced countries. First of all, it creates downward pressures on the employment and earnings of less skilled employees because of the trade and high level of immigration. The traditional answer to such pressure is that the developed countries invest more in educating their workers. The argument that the U.S., for example, gains skilled jobs while losing less skilled jobs, is relevant even more than in China and India with more population. The average worker in China and India has lower skills than the average employee in Mexico. This point of view illustrates that Chinese and Indian workers are competent better than substitutes for American workers. Whether they constitute the big part of the global labor pool, it reduces the prices of the manufacturing goods of the U.S. and raises demand and prices for the high-tech goods and services that U.S. sells. Lower prices for shoes, t-shirts and plastic toys, for example, and higher prices for semi-conductors and business consulting and finance services, would be in the interest of all US workers, because then they will be able to save more money while making purchases (Freeman, 2007). Based on trends in population, education and labor demand, the report conducted by McKinsey Global Institute illustrated that by year 2020, the global economy would face difficulties with those workers who would have college or postgraduate degrees- thirty-eight to forty million workers. This will constitute only thirteen percent of the demand for such workers. Ninety to ninety million more low-skill workers without college education in advanced economies will constitute only eleven percent of those that is needed. Such dynamics of the global labor market will bring more challenges (Farrel, et al., 2005). China and India, as McKinsey predicts, will be the worlds main source for skilled workers over the next two decades adding more than hundred and eighty million college graduates to the global labor market. Due to this reason, the center of human capital and innovations will be directed toward Asia mostly (United workers of the world, 2012). Conclusion During the last half a century, a generalized decrease in the total demand for labor was compared to the developments in international trade. The wages and employment conditions of unskilled employees in many developed countries are worsened. Depending on the level of development of the country, such tendency will increase or reduce its role in the global labor market. While hidden unemployment and wages rates are falling in many Asian countries, labor market conditions are slow in Latin America (Turrini, 2002). Most companies that operate worldwide, competition for talents are intensifying and the demand is in advance of supply. To have multicultural skills to succeed, companies should put into place programs that would recruit, train and retain employees and workers across all markets. If companies handle such challenges, use advantages and disadvantages of globalization for their good, they will be able to shift and adapt their activities to the knowledge-based economy, they would be able to develop systems that walk their talks and would recognize people as the most valuable resource. References Bakehot, 2011, Why Britain should be proud of opening its labor market to eastern Europe, The Economist, Available from http://www.economist.com/blogs/bagehot/2011/05/immigration_britain [Assessed on 15 January, 2015]. Farrel, D., Laboissiere, M., et al. 2005, The Emerging Global Labor Market: Part I—The Demand for Offshore Talent in Services, The McKinsey Global Institute Freeman R. 2007, The Great Doubling: The Challenge of the New Global Labor Market. 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