The Impacts of Financial Crisis on the Progress of Employees - Research Proposal Example

? Financial crisis impacts on progress of employees Background information The term financial crisis was not popular until theglobal financial crisis of 2007, that led to the collapse of major economies with United States being the worst affected. These have caused many institutions and individual to associate the late 2000’s financial crisis to the financial misfortunes they are currently facing. At this point we need to obtain a clear understanding of this phenomena, financial crisis can simply be used to refer to situation where an underlying financial asset or a financial institution losses much of it value thus resulting into for such institution or the investor current holding on the financial asset ( Lansky,2010). Financial crisis can be used to refer to economic; an economic crisis refers to a situation where the economy is unstable and thus the instability results to an economic recession or a depression. An economic recession results from economic shocks thus leading to real changes in the economy, in the case of financial crisis it may not necessarily result into an economic crisis. There has been many financial crisis with many of them resulting to economic recession to name but a few, the Mexican financial crisis which occurred in the mid 1990, the Asian financial crisis in the late 1990’s and the popular know global financial crisis in the late 2000’s that saw giant economies like the United experience negative economical growth (Akhigbe 1985). The Mexican financial crisis occurred in the mid 90’s and to be exact in late 1994 and 1995, scholars have argued that the devaluation of peso was mishandled thus resulting to the crisis. Mexico economy was growing at an average of 3.1% between the year 1989 and 1994, inflation rates were decline and 1993 there were a single digit after two decade of soar prices. This had made Mexico attractive to foreign investor thus making the capital inflows and foreign direct investment to spur the economy (Tuano, 2002). The economic growth achieved was halted by the decision to devalue Peso in December 1994 was not attractive to the foreign investors, thus there no more capital inflows and this was the commencement of what was later came to be known as the great Mexican Peso crisis. In addition to devaluation weak regulators systems as contributed to the crisis, after the foreign investor pulled out the Mexican government did not measures in place that could avoid depletion of foreign reserves or reverse the imported created demand thus resulting into a crisis (Muller, 2011). The Mexican crisis left employees vulnerable to high prices due to imported created inflation, these de-motivated employees as used much of their to cover bills and purchase basic commodities. Although manufactures could not request employees for a wage cut as suggested by many classical economist due wage rigidity, the employers resulted to layoffs so as reduce the monthly bills or closing. In some cases employers had closed down manufacturing plant as demand for their products was low, thus this led to many workers dream being shut down. The Mexican crisis was closely followed by the Asian financial crisis which can be contrasted to the earlier currency crisis to the crisis that had the most severe to Asian countries to name but a few Thailand and Philippines. The Asian financial crisis resulted to the main reasons as outlined below, shortage in foreign reserves, wrong replenishment measures by the International Monetary Fund and in adequate financial institutions. Similar to the Mexico the Asian counties before the crisis the countries experienced high capital inflows but unlike in Mexican cases foreign investors withdrew from Asia at some extent due to panic and contagion (Age?nor, 2006). Asian crisis also affected on employees, for example, in Philippines one of immediate reaction by companies operating in the region was to cut down cost of production thus resulting to down sizing of the workforce or even at worst level closing down. According to the department of Labor and employment around 155,000 were official reported to lose their jobs and about 3,072 companies had terminated their operations. In addition, there was low demand for labor thus affecting the workers as they had to find alternatives with the agriculture and industrial sector experiencing -3.4% and -1.0% annual employment growth. The chart below ( chart 1) delineates how unemployment in average increased in Philippines from January 1996 to October 1998. Chart 1: Unemployment rates in Philippines from January 1996 to October 1998, Also financial crisis has made the instances of underemployment to increase as shown below from data issued by the department of labor and employment (Philippines). Table 1: Underemployment Rates, from January 1996 to October 1998, in Percentages Period 1996 1997 1998 January 21.0 21.1 21.6 April 22.2 23.4 21.0 July 21.5 23.1 20.8 October 19.4 20.8 23.7 Average 21.0 22.1 21.8 Source: National statistics Office Philippines. In addition, the employees had to dig more in their pockets. As the national statistics office reported inflation to be more than 10% in December 1998. The recent financial crisis emerged from the united sates where complex financial instruments, such as derivatives have been used thus leading to securitization. This led to bust of subprime mortgage bubble thus causing the collapse of many financial institutions ( Dewatripont et al2010). The players in the financial sector created financial instrument so as to mitigate risk, but they also took a one more step and started trading these assets thus, assuming more risk without a clear understanding of these complex financial innovations. This led to the collapse of many banks and closure of many manufacturing plants also made the retrenchment instances to increase in the United States (Davies, 2010). The wages and compensation of workers have been observed to decline after any financial crisis as observed in the case Philippines. The workers working at the industrial sector earn lower wages due decrease demand for their services. Apart from the wages, labor standards and industrial relations have soared. In times of financial crisis many employees engages in acts of industrial strikes, also reduction of the number, of workers registering to join trade unions. Also, the number of trade unions registered at this period drops significantly. At this period, of economic downturn employers are reluctant to conform to wages standards (Auer, Auer, & Wehrmuller, 2008). This is because, at this period, the regulatory authorities are seek to establish more employment opportunities to reverse the unemployment trend thus leaving room to the creation of docile work force. Another instance, which affects workers that emerged, was the increased deployment of workers who were working overseas (Allen & Gale 2007). The statement of the research problem While many scholars and analyst has concentrated much of their effort in establishing the effects of financial crisis, where in most cases the just consider the economic related effects, there is an underlying predicament which has not received too much attention, “the impact financial crisis has had on the progress of employees”. Few scholars who have devoted their time and knowledge in analyzing the effects of financial crisis on progress: have engaged in heated debate on the effects of financial crisis on the progress of employees; with some scholars arguing that the progress of employees is not affected by the financial crisis while others argues that the financial crisis has a negative impact on the progress. For example, Tuano, 2002 in his paper titled “The effects of the Asian financial crisis on the Philippines labor market” Outline some negative contributions towards the progress of employees such decline real wages rate and compensation, soar industrial relations (such as declined trade union activities) (Tuano, 2002). Therefore, there is a need for research to be conducted so as to establish the impacts of progress of employees. Research questions This study in order to meet its aims and objectives seeks the answers to the following research questions, whose answer will be determined after the extensive process in line with the objectives. 1) Is there a relationship between progress of employees and financial crisis? 2) How does financial crisis impact on the progress of employees? 3) How does the financial crisis bring up the impacts determined during the study? 4) What triggers the impact of financial crisis on employee’s progress? Objectives of the study The main objective in this study will be to determine the impacts of financial crisis on the progress of employees. General objectives The general objectives of the study will be as outlined below, 1) To find out if there is a relationship between financial crisis and the progress of employees. 2) To establish what kind of relationship exist between financial crisis and progress of employees. 3) To determine how a financial crisis impacts on progress of employees. 4) To establish how financial crisis leads to the impacts on the progress of employees. 5) To find out the motive that triggers the impacts financial crisis has on progress of employees. Specific objectives The specific objectives are the core objectives which the study will aim to seek answers to with the highest level, of clarity. 1) To establish the impacts of financial crisis on the progress of employees. 2) To find out the force that triggers impacts of financial crisis on the progress of employees. Significance of the study In the recent past, the term financial crisis hit dominated the news line thus delineating the importance of a stabile economy. This has in turn offered opportunities for examine effects or the impacts that financial crisis could have to the various stakeholders. In addition, economists have continued to postulate policy that would reverse this crisis and lead the economies back to prosperity. Therefore, with many research engaged in ways of stabilizing the economies there is a need to understand the destruction caused the financial crisis to the employees, so that the necessary measure can be undertaken in an effort of resolving financial crisis related issues that affects the employees, such that we increase the level of labor productivity thus, propelling economy back to the track. Therefore, this study will be effective since it will bring to the attention of policy holders the underlying aspects of financial crisis also add to the current literature on financial crisis as well acting as a bookmark in the process of enhancing the employee’s progress. In addition to unearthing these impacts on progress of employee, this paper will also highlight areas that need further research so that more studies can be carried out and help in elevating employees also to come with ways in which their progress can be enhanced. References After the financial crisis ongoing challenges facing Delphi retirees : field hearing before the Subcommittee on Oversight and Investigations of the Committee on Financial Services, U.S. House of Representatives, One Hundred Eleventh Congress, second sessi. (2010). Washington: U.S. G.P.O. Age?nor, P. (2006). The Asian financial crisis. Cambridge: Cambridge University Press. Akhigbe, O. M. (1985). The financial crisis. 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