Learning Objectives

Welcome to class of Economic and Labor ForcesbyDr. Satyendra SinghUniversity of WinnipegCanada

Learning Objectives Objectives: • Purpose of economic analysis • Levels of national economic development • Dimensions of the economy and different indicators used to assess them • Importance of a nation’s consumption patterns and the significance of purchasing power parity • International labor trends • Labor union • Labor union membership • Multinational labor activities

Levels of Economic Development • Developed • Nations that are the most technically developed • Newly industrialized economies (NIEs) • The fast-growing upper MIG and HIG economies such as Taiwan, Hong Kong, and Singapore • Newly industrializing countries (NICs) • Brazil, Mexico, Malaysia, Chile and Thailand • Developing • Nations that are less technically developed • Emerging Markets • Transformation from controlled to market economy

Dimensions of the Economy… • Important Economic Indicators • Gross National Income (GNI) • GNI/capita • Purchasing Power Parity • Income Distribution • Private consumption • Unit labor costs • Exchange rates • Inflation rates • Interest rates

Dimensions of the Economy… • Gross National Income (GNI) • The measure of the income generated by a nation’s residents from international and domestic activity • Preferred over GDP • GNI/Capita • Used to compare countries with respect to the well-being of their citizens and to assess market or investment potential

Dimensions of the Economy… • Purchasing Power Parity • The number of units of a currency required to buy the same amount of goods and services in a domestic market that $1.00 would buy in the U.S. • Helps to make comparisons possible across economies CIA Fact Book

Dimensions of the Economy… • Income Distribution • A measure of how a nation’s income is apportioned among its people • Reported as the percentage of income received by population quintiles • Data gathered by World Bank • Income more evenly distributed in richer nations • Income redistribution proceeds slowly • Income inequality increases in early stages of development but reverses in later stages

Dimensions of the Economy… • Private Consumption • Disposable income • after-tax personal income • Discretionary income • income left after paying taxes and making essential purchases

Dimensions of the Economy… • Unit labor costs • Total direct labor costs divided by units produced • Countries with slower-rising unit labor costs attract management’s attention

Dimensions of the Economy • Reasons for relative changes in labor costs • Compensation • Productivity • Exchange rates • International firms must keep close watch on labor rates around the world

Labor Forces

Labor Forces… • International Labor Trends • Aging of Populations  • Rural to Urban Shift  • Unemployment • Immigrant Labor • Child Labor • Forced Labor • Brain Drain • Guest Workers

Labor Forces… • 192 million overall unemployed • Middle East and North Africa (13.2%) • Sub-Saharan Africa (9.7%) • Central and Eastern Europe (9.7) • Latin America and Caribbean (7.7) • Developed economies (6.7%) • Southeast Asia and the Pacific (6.1%) • South Asia (4.7%) • East Asia (3.8%)

Labor Forces… Immigrant Labor Refers to the process of leaving one’s home country to reside in another country Foreign-born Population comprises those immigrants whose move is permanent and may include taking citizenship Foreign Population who are guest workers

Labor Forces… • Child Labor • The labor of children below 16 years of age who are forced to work in production and usually receive little or no formal education • Primarily found in developing nations • Existent in developed countries • 70% is in agriculture • Forced Labor • Most common in South and East Asia

Labor Forces… • Brain Drain • The loss by a country of its most intelligent and best-educated people • When skilled workers migrate from developing countries they do so for professional opportunities and economic reasons • Reverse Brain Drain • The growth of outsourcing and the movement of highly educated, technologically skilled employees and research scientists to other countries

Labor Forces • Guest Workers • People who go to a foreign country legally to perform certain types of jobs • Guest workers provide the labor host countries need • Guest workers are desirable as long as the economies are growing • When economies slow, fewer workers are needed and problems appear

Labor Unions… • Organizations of workers • European labor • Identified with political parties and socialist ideology • United States labor • Laborers already have many civil rights • Collective bargaining • The process in which a union represents the interests of a bargaining unit (which sometimes includes both union members and nonmembers) in negotiations with management

Labor Unions • Japanese unions are enterprise-based rather than industry wide • As a result, unions tend to identify strongly with company interests • However, Japanese workers are reported least satisfied with jobs in developed world

Labor Union Membership Trends • Employers have made efforts to keep their businesses union-free. • More woman and teenagers have joined the work force, low loyalty to unions. • The unions have been successful in raising wages, which leads to offshoring. • In the knowledge economy, industrial jobs that have formed the core of union membership are declining.

Multinational Labor Activities… • Internationalization of companies creates opportunities for them to escape the reach of unions • In response, unions have begun to • Collect and disseminate information about companies • Consult with unions in other countries • Coordinate with those unions’ policies and tactics • Encourage international companies’ codes of conduct • Multinational unionism is developing

Multinational Labor Activities • International Labor Organization (ILO) • Purpose is to promote social justice and internationally recognize human and labor rights worldwide • Trade Union Advisory Committee to the OECD • Consults on trade union issues in global markets

Learning Objectives