Advantages And Disadvantages Of Opening Labor Markets On A Global Scale - Essay Example

Advantages And Disadvantages Of Opening Labor Markets On A Global Scale Introduction In contemporary business environment, many nations are concerned with competing effectively and efficiently in the global market. Many companies too continue to strive for increased profits and expansion in customer’s base. It has been evident that competitiveness in the labor market does not depend only on the effectiveness of individual firms, but also on the industries and economic performance. In recent past, the rapidly changing business environment and the world markets have dictated the path that nations take in terms of labor markets (Borjas, 2013 p., 56). Political and economic leaders have thus evaluated these opportunities in and threats from the existing external environment in order to develop appropriate national strategies. Some nations have thus adopted open labor markets due to the benefits. According to Jon c. pevehouse, he saw open labor market as the fruition of liberal economic standards. Furthermore, an open labor market has brought with it growth and prosperity. This economic expansion has made historical states obsolete as economic units. However, others have been reluctant to open the market due to their negative perceptions of open labor market. Furthermore, technology has today allowed businesses to be in global operations depending on their strategies, and even the smallest business can have customers in every time zone. While many global companies tailor various product offerings for different geographic regions, others have instead pursued a global strategy, selling the similar product worldwide. Open labor markets however, have advantages and disadvantages (Hamilton & Webster, 2009 p., 34). Labor market may be local and times global in their scope and composed of smaller, relating labor markets for different skills, and geographical locations. They are dependent on exchange of information for job seekers and employers about wage rates, level of competition, conditions of employment and job location. And opening labor markets has provided room for many benefits in the economy. Open labor market involves minimum government regulations. Open labor market refers to a situation where wages and market conditions are determined solely by market mechanisms and not governments or other agencies trades unions. Open labor market thus has one advantage of efficiency in the economy and enables individual firms leverage economies of scale (Berry, 2001 p., 45). From an economic perspective, open market has truly changed the business world and as such enhanced globalization. The main characteristic of globalization is enhanced free trade between countries, easier passage of the capital between country's borders, an enormous increase in foreign direct investment. This increases efficiency, and this is one benefit that is readily identifiable. As a result, many countries in with open labor markets, growth for both small firms and multinational companies, can now access new markets across the world. Due to this efficiency in the economy, there has been increased transport and communication between nations and continents. When economy sells the same product worldwide due to the efficiency, individual company can Purchase its raw materials in bulk, in the long run, saving the firm thousands of dollars per year (Loayza & Serven, 2010 p., 123). Due to these illustrations, it is quickly established that firms in opened market tend to be more competitive and efficient. Since open labor markets assist in the maintain costs down for companies. For instance, companies have been able to get rid of surplus workers. This can assist these company avoid being bankrupt and in the long run protect jobs. Arguably with globalization, it is becoming more and more essential for companies to remain competitive within any global economy. This is achievable through open labor market strategies (Dao & Dao, 2008 p., 151). Opening labor market benefits for economies and consumers. Consumers are able to enjoy a greater choice of foreign goods and services since they are offered for them to buy. For instance, customers from Europe are able to obtain a variety of goods that are produced by American labors and at the same time from their continent and country. They also gain at lower overall prices for these goods, as a various classes of goods for sale enhance competition and drives prices down. Producers in nations with open labor agreements also gain from free trade in the form of an expanded larger export market (Sinkovics & Ghauri, 2009 p., 13). As opposed to being able to export to just a few nations, exporters can presently sell their goods to consumers and wholesalers in a large variety of economies. Open market economy also allows nations and various economies to specialize, producing better quality goods at better prices. If a nation, for instance, has huge oil reserves, but less land that’s suitable for farming, it can focus solely on oil production while importing fresh food from foreign countries. These are arguably huge benefits to the individual industries and as such huge economic gains to the nation. As a result, free movement of labor is possible. By opening the labor market and allowing free trade, workers can easily move from one nation to another to market their professional skills to employers and thus contribute to the economy (Ashenfelter et al., 2010 p., 17). The other advantage of open market is that it is very useful on the basis of product life cycle. A company in any open economy can phase its release of various products, introducing older products into newer economic markets and saving the launch of a product's most new version for well-developed markets (Henderson, 2007 p., 34). Open labor economy emphasizes on transfer of factors of production including capital to new market hence expand these markets. This goes in the long run in help a company can phase its release of various products, For example, a Phone company could sell its older-model phones, particularly unsold stock, to a less-developed market after it introduces a new phone model. According to Haralambos, he held a view that the global economy is no longer fundamentally industrial or agricultural in its basis but rather, it is increasingly more dominated by activity that is in substantial and light. This light or weightless open economy is one in which company’s products have their root in information, as is the case with computer software, Internet-based services, media and entertainment products. The process of globalization is often viewed exclusively as an economic occurrence. Most is made of the importance of transnational businesses, whose colossal operations presently extend across national geographical borders, swaying global production course and the international distribution of labor. Transnational businesses are firms that produce market goods or services in more than one nation (Ogunsola, 2005 p., 133). These may be reasonably small firms with one or even two factories outside the state in which they are established, or huge international ventures those whose operations cross the continents. For instance, the older model may be outdated by American or European consumer by in other regions or continents the product may have not even reached. Open labor market has enabled these companies channel these products elsewhere to make more profits. While many features of open labor market have been beneficial, others have led to problems or challenges for other countries and economies. This has formed the basis for argument against open labor market for those nations who would rather stick to the traditional closed economy strategies for instance Japan. Each of the advantages of globalization, from free movement of labor to free trade, has also been a downside for specific economies and countries. One of the biggest downsides is the harm it may cause to economies at an initial stage of development. According to (Hill, 2009 p., 35) Global Market implies to the “Merging of Historically similar and separate countries markets into one huge global marketplace.” With the increase of global markets, liberalize the economic activities of exchange of goods movement of some factors of production. Removal of Cross-Border tariffs or trades barriers has made development of Global Markets more and more feasible. But these many times have been considered a blessing in disguise. Since open labor market forces all nations to compete using an even playing the ground, which economics critics argue puts smaller, less developed nations behind their more developed or industrialized counterparts. If the trade should be equitable, then they should be a mechanism equity should be in all aspects they further argue. Still on this disadvantage some economists believe that open labor market is only possible if industries in less developed countries are permitted to grow to a given level of economic protection that more often than not rarely occurs. This is referred to as the Paradox of Free Trade, and it forms the core argument among economists against open labor market (Longhi, 2005 p., 122). Another downside of open labor market is the phenomenon referred to as ‘labor drain.’ Since through open labor market workers move freely from one country to another, some countries especially those in developing countries with limited job opportunities always find it disadvantageous to encourage skilled workers or professionals to stay in their countries. Closely related to this downside is the challenge of Operational Risk. With open labor market, operational risks are unavoidable. In a word of uncertainty open labor markets, can further worsen performance of individual company and an economy in the long run. For instance, employment laws or corporation laws always change in the nations where a company manufactures its global product, and should this happen then that could ruin everything. Likewise, if turmoil breaks out in the same countries, employees go on strike occurs then the company may not be able to fulfill its obligations. The goal of any company is to expand and obtain more returns, but times this may not be possible when labor supply is interrupted. This is a huge risk that open labor market portrays (Irwin, 2009 p., 12). In the past, these possibilities were far-fetched impossibilities but with the recent abrupt Arab springs and wars in various parts of the world particularly developing countries in Africa and Middle East critics never want to risk anymore. The final downside of open labor market is related to macroeconomic risk. The major downside to pursuing open labor market strategy is that a one-size-fits-all method does not work in all markets. Some markets tend to have particular tastes and preference or are more sensitive to given level of pricing. Due to the difference in cultures policies in various countries across the world, taste and preference have been varied too. Moreover, a firm’s products habitually are more popular in one region than another region; deciding in which region a product will be popular is a challenge. The argument hence becomes how effective can a company can combine their strategies to merge customers taste and preferences across the globe. As a conclusion, it is prudent to underscore the fact that open labor markets play an important part in shaping modern economies. With free movement of factors of production, various benefits are accrued. In recent past, the rapidly changing business environment and the world markets have dictated the path that nations take in terms of labor markets. Due these changes, the economies around the world are no longer self-reliance. Most notably has been the fact political and economic leaders have thus evaluated these opportunities in and threats from the existing external environment in order to develop appropriate national strategies. One benefit that has been enjoyed many nations applying open labor market is efficiency in the economy as it is easier to move to the capital between borders, and hence there is a massive increase in foreign direct investment. Too open labor markets have been very useful on the basis of product life cycle as goods can be channeled to the less-developed market after it introduces a new phone model. Moreover, some nations have been reluctant to adopt open labor markets due to the drawbacks. Some of the reasons for this are due to the operational risks they possess and macroeconomic risk. Despite the debates and arguments that various economists have leveled against open labor markets it remains to be a great avenue for economic growth and development around the globe (Geoff Riley, 2006 p., 36). ReferencesTop of Form Bottom of Form Top of Form Top of Form Bottom of Form Bottom of Form Ashenfelter, O., & Card, D. 2010. Handbook of labor economics. Vol. 4A, Vol. 4A. 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