The effects that globalization and technology on the job market - Essay Example

Section One Schumpeter’s article, “Angst for the educated”, talks about the new trends in the job market in relation to education. It has the notion that among people, education is the gate pass to a life of financial success and security in the all parts of the world. This has made education, especially in the developed countries, to be highly regarded especially among the older generation. Most parents ensure that their children get university education because they believe that this is the way that they can increase the chance of getting a well paying job. Indeed, statistics show that educated people are expected to earn more money in their lifetime than their uneducated counterparts in the United States. The gap between the two keeps in increasing. There are now changes that are taking place the today world that is changing this. It is now emerging that this relationship between education and jobs is about to change due to new developments such as deregulation, globalization and change in technology The article highlights the effects that globalization has in the job market of the rich countries. Globalization has benefits such as increasing the market for company’s product thereby increasing job opportunities. The disadvantage, however, is the drain to developing countries. The graduates from universities of the rich countries have to compete with those of poorer countries. This has been enabled by globalization because firms are able to find employees from all over the world easily. They do not have to employ from their own country as was the case before. Globalization has also enabled companies to move from one country to another easily. Most manufacturing companies are moving from countries with high labor rates, which are the rich countries, to the countries with low labor rates such as those in Asia. This can be achieved by moving the factory function to the low labor country and leaving the management function in the home country or to outsource a function such as online consultation to the specialized firms in the foreign country . This has caused job losses and lack of opportunities in the rich countries. This is compounded by the fact that the low labor countries have very many qualified graduates who can do the job as well as the individuals in the developed countries. These graduates are willing to work more for less. Firms are finding it viable to switch to these countries in spite of the impact this has to the home countries. This is because the firms have to enhance their competitive advantage by lowering the costs of the firm. The other issue is the effect of technology on the job market. The article acknowledges that we are in age where technology is improving very fast. The technology is being used to perform tasks that were being performed by human beings, and, it is emerging that, in future, many of the jobs done by the educated people will be replaced by machines. This is mostly the repetitive jobs, therefore; the jobs that are likely to be affected are those in the mid level in factories. The new technology also enables an uneducated person to perform tasks that only an educated person could perform. This has greatly affected the professionals such as accountants where accounting programs are able to be handled by people with very little knowledge of accounting. Some of the jobs such that have been well paying and require high level of education such as medicine and law are also being affected. The effect of such jobs is in different forms but is due to advancement in technology. Some of the reason are due to the fact that the customers do not have to use the service of the these professions, for instance patients can get advice straight from the Internet on health, they, therefore, do not have to use a doctor for this service. This lowers the demand for doctors. Another reason is due to the outsourcing companies, for instance, many of the jobs in a hospital do not relate to treating patients alone. Just like in any other firm, the hospital has supporting functions such as information technology. A large number of people have been employed in the hospital to perform such services. With the advancement of new technology the company may search for an external source of these services. The people employed in these functions end up losing their jobs. The specialist companies cannot take up all these unemployed people because they also use modern technology to reduce the number of employees. One specialist company can serve very many companies and this greatly reduces the number of employed people and lowers the opportunities of graduates. Section Two a. In such a case, the aggregate demand curve would shift right (Krugman and Wells 235). b. In this case, the demand of products will rise due to the fact that the price of American commodities have gone down in other countries. The exports have become cheaper because of the fall in the value of the dollar and the imports into the country become more expensive and, therefore, consumers prefer to buy locally. The exogenous increase in demand for exports combined by the exogenous decreases in imports caused the aggregate demand curve to shift to the right. c. The dollar decreased in value. This can be explained by that fact one dollar can be exchanged for fewer Euros than before the change. d. An inflationary gap is one of the two gaps that arises when the equilibrium aggregate production does not match the level of aggregate production, the other being the recessionary Gap (Krugman and Wells 300). The inflationary gap specifically arises when the equilibrium production is higher than full employment production. It could be caused by the expansion of firms e. In the case of an inflationary gap, the consumers benefit because the firms have increased competition due to the increased supply, thus, they are better off in the short term. Conversely, the business is worse off because there is increased competition, they have to lower their prices in order to attract demand and lower their income. This situation also reduces their chances of expansion because there is no labor in the market. f. Recessionary gap g. In a case where international prices of oil go up, the aggregate demand curve will shift to the left. This is because households have to spend most of their incomes on oil since it is an essential commodity. They will be left with a very little amount of expendable income. This will lead to a decrease in the in consumption of commodities. Beliefs for full employment Main influences on aggregate demand Nominal (money) wage Belief about tax policies Classical automatic Free market Flexible Little effect Keynesian No possible employment Little flexibility Effective Monetarist No possible Inflation Flexible Ineffective Section Three a. When the AD shifts from AD0 to AD1, this is where the demand curve moves to the right. This shift can be caused by several factors. They include the exogenous increase in consumer spending, the exogenous increase in government spending, the exogenous increase of purchase of the country’s exports by other countries and the decrease of imports in the country (Krugman and Wells 63). Other reasons include an exogenous increase in intended investments in inventory capital and a decrease in tax levied. b. In this situation, the nominal wages will have increased. c. The real wages, which are wages adjusted for inflation will not have changed (Krugman and Wells 23). This is because the prices have also increased. The purchasing power of the increased incomes will not have changed d. Businesses are better off at point b in the short-term because they get to increase the prices of their commodities and the demand remains high. In the long run, however, the consumers cannot sustain this kind of demand. The demand will, therefore, have to fall. e. The move of b to c is due to the fact that when nominal incomes increase, the price of products also go up, which results in inflation as a short term-run equilibrium. Continued perceived increase of normal increase in incomes causes prices to go up further while the real incomes have to remain stable.. This results to the formation of a new equilibrium f. Action of policy makers. g. The reason for the move is due to action of policymakers. In the short-run, the policy makers may seek to reduce the unemployment rate through expansionary policy. This however, causes the unemployment rate to be lower that the natural rate. It leads to a higher inflation in the long-run (Krugman and Wells 125). This is because exploiting the short term trade off will raise the inflation expectations. This will therefore lead to the curve moving toward the left to the new short run curve. And thus moving the new equilibrium. h. The natural rate of unemployment is when the rate of unemployment is consistent with the aggregate production being at the long-term level (Krugman and Wells 45). This is the level where there is no temporary interference by policy makers such as price adjustments in labor and goods market. The natural unemployment, therefore, is determined by the supply side which is the production possibilities and economic institutions. The interference by policies can cause unemployment to move from the natural state but they cannot permanently reduce actual unemployment. They are however useful in stabilizing variations in actual unemployment. Works Cited Krugman, Paul and Robinson Wells. Macroeconomics. (2nd. Ed.), 2005. Boston: Worth Publishers. Schumpeter. Angst for the Educated, 2011. The Economist. Web. April 2, 2012. Read More