BUS203---term ppr--unemployement and its consequences

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Information about BUS203---term ppr--unemployement and its consequences

Published on February 22, 2014

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This paper is a deliberation of the six articles, regarding unemployment and its consequences, provided from “The Economist” Sept. 10th 2011.

For. Professor Dr. Akbar Ali Khan's class

BUS 203 Fall 2012 Term Paper Professor Dr. Akbar Ali Khan Group 4 11/28/2012 This paper is a deliberation of the six articles, regarding unemployment and its consequences, provided from “The Economist” Sept. 10th 2011.

Term Paper Course Name: Business Environment Course ID: BUS 203 Section: 0002 Course Instructor:Professor Dr. Akbar Ali Khan BRAC Business School Members of Group Four: Sl. Name I.D. 1. Nusrat Jahan 10204101 2. TanijaNasrin 10304086 3. Protiti Khan 11304018 4. SamiyaYesmin 11304043 5. AnikaTasneem 09104150 6. Nabila Nourin Natasha 09304051 Page 2

THE ARTICLES FROM “THE ECONOMIST” ARE: 1. The Great Mismatch— the future of jobs 2. Winners & Losers—labour market trends 3. My Big Fat Career— self-help 4. Got Talent? — companies’ concerns 5. Lending a Hand— the role of government 6. More Feast, Less Famine— better balance Page 3

INTRODUCTION: This is a term paper written by a group of six students as stated above as a requirementforthe course Business Environment, taught by Dr. Akbar Ali Khan. This term paper is based on six articles namely:The great mismatch,Winners & Losers, My big fat career,Gottalent?Lending a hand and More feast, less famine, all of which is related to the labour market. The first article, „The great mismatch‟, discusses abouttheuneven distribution of jobs in the world, the problems different economies are facing due to unemployment, the type of people firms are nowadays demanding and what are the reasons for this change in labour market structure. The second article, „Winners & Losers‟ talks about that the youth being the ones most affected by unemployment, older people working longer thereby reducing jobs available to the young, the crisis allowing companies to choose the best employees and contingent workers and outsourcing causing further unemployment. The third article „My big fat career‟ discusses about millions of people being unemployed in Spain and America but not knowing how to get back to work, job applicants having to work harder to attain employer attention and steps that people should take in order to get a job. The fourth article 'Got Talent?‟ elaborates on how firms fight for getting talented employees and how to keep these talented employees motivated enough to be productive and to prevent them from leaving the organisation. The fifth article “lending a hand” talks about the role of the government in this situation that has given rise to instability. The sixth article „More feast, less famine‟ discusses the possible reasons of unemployment now a days and ways the government can help to overcome such difficulties in the long run. In this term paper we have first written a summary of all the six articles. Then we have discussed how the issues discussed in the article are related to business and their impact on the business environment. Lastly, we have included a section where we have discussed our own interpretation of the articles, based on our own understanding, along with some recommendations. Page 4

SUMMARY: The six articles „The great mismatch‟, „Winners and Losers‟, „My big fat career‟, „Got talent?‟„Lending a hand‟ and „More feast, less famine‟, discussesabout different issues related to the labour market. The summary of the articles are as follows: The article „The great mismatch‟ mentioned that in today‟s world, jobs are so unevenly distributed that in developed parts of the world people are getting the jobs of their dreams, that provide a good salary and satisfaction,whereas in many other parts of the world people are highly unemployed and those who are employed are poorly paid and have no satisfaction.Unemployment leads to political repercussions such as presidents losing their presidency due to the inability to provide enough jobs.In the European countries, the governments prevent defaulting on the debts taken by reducing jobs in the public sector. This has led to riots and protests in countries like Britain and Spain. In addition Arabian countries are unable to provide proper jobs to the young civilians. Even growing economies like China and India are worried about how to guarantee appropriate jobs for the youth. Although many people are facing a scarcity with respect to jobs, the talented individuals are at an advantage. They are receiving interesting jobs with their own terms and conditions and are much highly paid than the average performer. This increases inequality and causes social tension. Globalisation and technological advancement is likely to initiate long term changes in the labour market. A Nobel Laureate Economist Edmund Phelps contemplates that America‟s current medium term natural unemployment is approximately 7.5% which is significantly greater than the last few years.However, another Nobel Laureate Economist Michael Spence argued that globalisation had a more powerful impact on unemployment compared to technology and said that most jobs available to American‟s in the tradable sector are open only to skilled and educated people. In order to decrease the natural rate of unemployment structural transformations such as to shape the education system in such a way that all candidates are equipped with all the desired skills has to be brought about, the tax system has to be modified, the welfare system has to be updated and an environment encouraging entrepreneurship and innovation has to be made. Labour globalisation may be seen as more of a zero- sum game than a win-win situation if we consider the job loss of one person to the job gain of another person due to outsourcing. However, this is true if there is a fixed quantity of jobs to be circulated around. Even though free markets are said Page 5

to make everyone better off, a global market for labour will not make everyone better off i.e. there will be some losers and some winners. The changes happening currently in the labour market are likely to create large number of losers because of recession and due to the fact that these changes are occurring very fast. The article „Winners and Losers‟ expressed that recently, there has been a certain increase in employment in the countries hit by 2008‟s financial crisis. However, this in no way makes up for the current unemployment rates all over the world. What is worse is that in addition to the 205 million unemployed, there are 1.53 billion more that are in “vulnerable employment”. Before the financial crisis, the employment rate was moderately stable but 4 years after the crisis, the scenario does not look like it will be going back to that state any time soon. According to research, it looks like young people are and will continue to be worst affected by the victims. Older employees are working for longer periods instead of retiring thanks to laws making that easy for them and limited retirement plans. These long-time employees are holding on to their jobs and young people have to search for jobs for longer periods which may inevitably discourage them and may even lead them out of the labour market. The crisis has proved beneficial for businesses because now they have an excuse to do what they could not do before. Companies have always looked to streamline their workforce and now thanks to the crisis, they are easily able to do so. Using financial troubles as excuse, companies are hiring greater numbers of part-time workers and are outsourcing more jobs to third world nations. For this, people with the education and skills are still finding it hard to find well-paying jobs due to the loss of jobs to other nations as well as standardization of jobs using technology. Except for a few interactional jobs (relying on expertise, knowledge and collaboration with others) in which employees are paid disproportionately well, most other employees are looking at tough challenges in their future no matter what their capabilities are. Household incomes increased in all the OECD countries in the two decades and as a result of that inequalities are widened. Household income of the richest 10% was almost nine times than the poorest 10% in 2008. Gradually the inequality in income is decreasing as many people came out from the poverty line. Inequality coefficient is known as Gini coefficient. Most countries seem bound to face the problem of growing in inequality rate though in an economic crisis of the country. That is why the world is facing short supply of talent and skilled workers in every sector of the business. Page 6

The article „My big fat career‟ mentioned that in Spain and America millions of people are unemployed but do not have much idea about how to get back to work. There are jobs but applicants have to work far harder to get the employer‟s attention, the main thing is to give them hope and teach them the exact way to look for a work. They should market themselves better and consider a broader range of employers than they might think of. They must clean up their actions on the internet because it offers a large amount of information to the employee seekers. There are many websites which shareinformation about firms and companies and they also suggest what type of question an interviewee might face and what answer they might give to secure the job. The websites like LinkedIn enables the job hunters and job seekers to find mutual contacts. In addition, people looking for jobs should acquire new expertise every few years if they want to be a part of the rapidly changing market. According to Linda Gratton of London Business School this process is called “serial mastery” she also notes down that the present education system is doing a poor job of equipping people for continuous learning. She recommends some tricks; they should have „build a posse‟; need a „big ideas crowd‟; lastly, „regenerative community‟. The main message is workers have to take responsibility of their own future. Nowadays much modern industrial work is essentially dehumanising, people are very much interested in doing things which they find fulfilling, many of today‟speople under 30s spend their working day in making the world a better place rather than being properly paid they want the opportunity to do something they enjoy.The traditional way for workers to protect themselves from ill treatment is to club together to form a trade union. This may be a start of a new mutualism movement. This new movement will bring together mutual organizations, co-operatives, and social enterprises to build a market based safety net and exercise political influence to get better protection. If this happens then it will be the success of an association which in future will be lead to a good example for other organizations. The article 'Got Talent?‟ discusses that the competition to hire the best employee has engaged firms in an increasingly fierce war for talent. This war is fought on three stages. First involves hiring the best people in their respective field because they are thought to be most productive. Second is to go for specialised skills, since some skills are more sought after than others. In fact the war for talent is not just about knowledge, but also about skills in different fields. In rising markets, the rapid economic growth is creating shortage of people, thus making it hard to hold onto workers as to hire them in the first place. Therefore the big challenge for the Page 7

employers is to keep their employees motivated and also keep the talent inside the organization. Educated, creative workers want to have more control on their working lives, so big amount of money is not always the key to keep your employees in hand. And if the work itself is boring huge number of incentives will fail to do any magic. Not only finding the right people for the company is hard, but keeping them is harder. Surveys suggest that four out five employees wants to leave their current job, but not doing it because they will have trouble finding another job in such competitive job market. So the key is not only to make the jobs interesting but also proving incentives and introducing newer techniques of human management, but also to make employees engage with each other. The article „Lending a hand‟ talks about the appropriate function of government in job market. The combination of flexibility in the market for labor and central bank can reduce unemployment as well as inflation. Thus business cycle can run smoothly. But controversies stand about labor market flexibility. One nation blames others about the long term unemployment. In Germany short term working was introduced reducing unemployment, now many other countries follow this system. In another way economists suggest government to introduce insurance policy to reduce unemployment. In European Union a policy was taken that reduces working hour of employees rather firing them, thus new people were hired and unemployment was plummeting. More young people were recruited. But after taking place by Conservative Liberal Democrat, they introduced new work frame by themselves, “tough love” welfare were introduced then. Thus various schemes were helping dropping unemployment. At the same time some step was taken to make people employed by giving them several field works, industrial work. But it‟s not so easy to do because first of all everyone cannot do everything. There must the cost of training under consideration. Another idea was offered in following China, that to restart the closed infrastructures in America despite thinking of the cost again. Today‟s world want one man with 10hands rather 10 men with 2hands. In recent times it has recorded that the collection of tax was less in America. To resolve these experts‟ advices that to increase more foreign direct investment in America thus corporate tax will be gained. Even redesigning the education system and training is advised by the economists. Apart from only doing jobs or part time work, people can make their own income source and they recruit more people in it. Actually it is been said to be an entrepreneurs for everybody. More innovation can come out through it. It has been said that Small firms need people to find opportunities to scale. Page 8

But government doesn‟t help them properly. But from the private sectors financial support is at hand. It is been calling the government to invest more in entrepreneurship. It has been said that entrepreneurship is in American‟s DNA but experts denied on this statement observing the situation. It is being saying that China will be trouble of creating new jobs in next five years. To resolve these problems Chinese government from now are welcoming entrepreneurship. But the same question arises here, who will finance and the answer is still same. Without engaging government in entrepreneurship reducing unemployment is not possible. The article „More feast, less famine‟ talks about the present situation of the job market in the world. There are changes under way to improve the present condition significantly so people can have jobs worth doing. But even with globalization and pro-market reforms being underway, unemployment is higher than usual leading to a grim outlook. Coming across decent jobs for most people is becoming harder. The mismatch between skills available and skills demanded in the market has promoted such great imbalance. This has occurred as students have been misguided regarding education choices and also due to archaic educational systems. This is the first obstacle government has to overcome, as is being done in India, by changing useless graduates into useful ones through massive programmes. Secondly the government has to create the right environment that would promote businesses to invest hence promoting employment. Through sensible regulation, through competitive or marginal tax rates and through supporting private sector, government can help. The idea of creating flexible labour markets as well as initiative to loosen up inflexible labour market should be given thought. And through this tough time of long unemployment, the government should try and support people by providing benefits to ensure that it becomes easier for them to kept working instead of being permanently unemployed. And while the government gets its act together, people themselves should try brush up their skills to ensure future employment. Page 9

RELATION &IMPACT ON BUSINESS: As has been mentioned in the article „The great mismatch‟ unemployment is due to technology and globalisation. Businesses nowadays are adopting more and more advanced technology in order to improve productivity. This desire for maximum productivity is causing more and more firms to replace less productive human workers with machines. As a result, unemployment is increasing. Also, in order to earn maximum profits firm are trying to reduce costs to a minimum. As a result they are outlaying greater number of employees and also outsourcing jobs to developing countries were jobs can be done at lower costs. This causes further unemployment. Therefore businesses with the help of technology and globalisation are being able to reduce costs and increase their profit at the expense of unemployment for nationals in the country. This high unemployment indicates that there is a higher supply of labour than what is demanded. This causes prices of labour to fall or in other words wages to fall. This means that businesses will be able to recruit people at lower cost. High unemployment also means that a greater pool of candidates is available to choose from. Therefore firms will be able to recruit the best employees from this diverse pool. The article „Winners and Losers‟ mentioned that there has been an increase in disposable household income of OECD countries. This increase is related to the number of MNCs in the country. MNCs with their power are able to buy raw materials at very cheap prices and hence make large amounts of profits. These MNCs pay taxes to the government so the economy of countries with MNCs improves. As a result, the countries with more number and more powerful MNCs are getting wealthier and hence inequality amongst countries is increasing. Also, the MNC owners, due to high profits, are earning more than an average person. This leads to an increase in the gap between rich and poor within a country. Therefore MNCs create inequality by increasing disposable income in OECD countries. This increase in disposable income creates a greater profit potential in OECD countries. This is due to the fact that if disposable income increases there will be an increase in the consumption of goods and services. People with greater disposable income will have more money on hand to buy things so if companies market their products to these consumers successfully then there is a chance of greater volume of sale. Page 10

The article „My big fat career‟ mentioned that people have to actively search for jobs and market themselves properly to get a job as businesses have become very selective in terms of people they hire. This active search for jobs in such a competitive world is causing people to become very career oriented. As a result, they keep looking for jobs in the internet and other advertising media. This creates an opportunity for Ad firms. They are opening websites, designing social hubs carrying all information about jobs. For example, we can say about the LinkedIn and glassdoor.com, both doubled its share price and have become an integral part of the job market. The article „Got Talent?‟ explained that there is an increasing fights for attracting highly talented and skilled personnel.This talent war can be related to firms becoming increasingly sophisticated in terms of the technology they use. As a result, individuals who are able to work with or run this sophisticated machines have to be hired. Therefore technological advancement of businesses increases the demand for talented employees. The number of talented people, however, islimited so firms have to market themselves properly in order to attract these individuals. In addition,talented people, once these have been hired, firms have to constantly ensure that the job is interesting and challengingenough and provide employees with proper incentives, freedom, etc. in order to keep them in the organisations. The article „Lending a hand‟ mentioned that many firms in India are using in-house universities to educate the recruits the fundamentals of their business. The article also mentioned that the American government has given such type of industries the capital required to train 150 workers to reduce the skills gap. These programs,if successful, will benefit businesses by giving them access to a greater pool of skilled labour to recruit from.As a result, businesses will have a greater number of skilled people as part of the workforce. The article „More feast, less famine‟ mentioned thatthe government has to give sensible regulation, keep taxes competitive with low marginal rates in order to create conditions for businesses to create more jobs. This shows that high taxes make businesses outlay employees to reduce costs. This attempt of the government to keep taxes low may enable businesses to make greater marginal profits. In addition, lower amount of regulation may encourage more people to open business which in turn may increase the number of jobs. The opening of greater number businesses may also increase the amount of competition. Page 11

COMMENTS& RECOMMENDATION: Unemployment is mainly for untalented, unskilled people so if the government takes the initiative to teach and train these people through special schools and institutions then they may be seen as skilled labour by firms and therefore their demand may increase. In addition, if countries place an embargo on job outsourcing to abroad countries then firms will be forced to give those jobs to nationals. Therefore, by this practice countries will not lose its jobs to countries situated abroad. Lastly, if the government develops and enforces laws that make it mandatory for firms to have a minimum percentage of people working in factories then firms will not be able to replace all human workers with machines. This may decrease unemployment to a great extent. For combating the problem of older people not retiring from work the government can pass a law stating the age limit, for each position, till which employees can work in organisations. This law should also state the benefits that companies have to provide to each employee on retiring. This will cause jobs to open for young employees on the retirement of the older employees. People,beforetryingto get a job, should carefully screen what they or someone else have written about them on websites especially on social networking sites because it is a source of large amount of information on them, they should also continuously engage in new courses or training that give them new skills and knowledge to remain updated with the ever changing global situation. They should look outfor jobs in all sorts of media such as newspapers, internet, billboards, etc. Since firms want to hire and sustain talented employees in their organisations they should give them enough liberty so that they do not feel pressurised. Also, for such talented people salary is not the most important factor so they should help these employees maintain a balance between work life and family life by providing facilities such as Day care for mothers, flexible timings, etc. Also incentives recognising their contribution are important. Page 12

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