Business in the Globalized Economy (Essay Sample)

Business in the Globalized Economy Student’s Name Institution Affiliation Course Details Instructor’s Name Date of Submission Business in the Globalized Economy Over the years, immigrants have posed a tremendous threat to native citizens when it comes to the labour market in all developed countries. The immigrants who primarily emanate from third-world countries arrive in those countries fleeing poverty in their mother country, searching for green pastures in their newly found homes (Esterline & Batalova, 2022). While the entry of immigrants is advantageous to businesses operating in those countries, it also disadvantages native citizens. The immigrants provide labour to the businesses at a lower rate than the native-born workers charge for the exact service. Several factors contribute to the immigrants providing cheap labour compared to the native-born workers. First, immigrants are willing to accept lower pay than native-born people because the cost of living in their home countries is lower than that of their host country. Low living costs make the immigrants susceptible to lower pay so they can afford their day-to-day needs in the host country (Wright & Constantine, 2021). Additionally, the immigrants are exposed to imminent barriers such as communication challenges and lack of recognition, which further escalate their plight for survival. Therefore, they are willing to work at any pay rate. Therefore, to be able to deal with the issue of immigrants willing to work at a lower pay rate than native-born workers, it is essential to identify the underlying issues affecting the immigrants and address them. In a globalized economy, immigrants play a pivotal role in the economy's growth. The immigrants can provide quality services at a lower rate, significantly reducing business costs. The reduction in cost leads to a decrease in the prices of goods and services, and therefore, consumers can access goods and services at a lower rate than would have been possible if native-born workers had done the work (Peters, 2015). Immigrants are, therefore, crucial in providing high-quality products to consumers while maximizing profits for businesses. However, the government is responsible for protecting its citizens and ensuring quality livelihood and fair labour practices for its native-born workers. Therefore, it is essential to determine the immigrants' impact on the labour market and how they affect native-born workers' ability to acquire jobs. Illustration of the Impact of Immigrants on Wages of Native Born Using Simple Specific-Factor Model where Natives are Identical Immigration has been a delicate issue over the years in economic discourse, especially concerning its impact on the wages of native-born workers. The immigrants provide a cheap alternative for the employers, making it challenging for the native-born workers with the same experience to be employed. The employing of immigrants for cheap labour, foregoing the equally skilled native-born workers, is disadvantageous to the natives and poses life-long threats to the natives' survival and the relationship between the natives and the immigrants. The simple specific-factor model will offer vital insights into the impact immigrants have on the wages of the native-born, as it is a theoretical framework that is easily adjustable to offer critical information on the dynamics related to employment and wages. Assumptions of the Simple Specific-Factor Model A few assumptions are devised for the Simple Specific-factor model to be effective in the analysis. Firstly, the model only considers two production factors: labour and capital. It is essential to note that capital is immobile while labour is mobile in the model. The simplification of the model to consider only two production factors is essential in analysing the impact of immigrants on the wages of native-born workers. Moreover, the model assumes that the immigrants and the native-born workers are identical. Therefore, the immigrants and native-born workers act as substitutes for each other in the labour market. It is an essential assumption as it simplifies the analysis by treating all workers as homogenous entities without considering their origins. Since the model assumes there is perfect substitutability of the natives and immigrants in the labour market, the model focuses on the impact on wages from the changes in the labour supply without considering differences in the skill levels and productivity between the two groups. Lastly, the assumption of labour mobility implies that the two groups can quickly move from one industry to another in response to changes in labour demand and wages. It facilitates the comprehension of how immigration affects wages. Immigration plays a pivotal role in wage changes as it allows the reallocation of labour resources to respond to changes in labour market conditions. However, it is vital to note that different factors such as job-specific skills, geographical skills, and social network inhibits labour mobility and, therefore, significantly impact the transition between industries, leading to an overall impact on how immigrants may affect the wages of native-born workers. The diagram shows a production frontier, which portrays the relationship between wages in the industry and the supply of labour. When there is a low supply of labour in the industry, there are high wages. However, with an increase in the supply of labour, the wages significantly reduce. Explanation of Wage Changes with Inflow of Immigrants The industry's labour supply increases with the inflow of immigrants into the economy. However, since native workers and immigrants are assumed to be substitutes, the increase in the labour supply exerts downward pressure on wages. In the industry where most immigrants are employed, the wage decline is significantly high due to the high concentration of the immigrants’ cheap labour. Also, the native-born workers in this industry experience a decline in wages due to the presence of immigrants. Illustration of the Impact of Immigrants on Wages of Native Born Using Simple Specific-Factor Model where Immigrants are Complements to Natives Explanation of How Wages Change with the Inflow of Immigrants In this scenario, the dynamics of the simple specific-factor model are altered since immigrants complement native-born workers. Their presence enhances their productivity and effectiveness. Therefore, the increase in immigrants increases the labour force in the two industries, stimulating demand for Native and immigrant workers. The influx in industries where immigrants are predominantly employed also increases the demand for native-born workers. The increase in demand for native workers is caused by the complementary nature of the two groups, where the two groups effectively work together, enhancing productivity. The increase in demand for native workers leads to an increase in their wages. Also, since each group needs each other for optimum productivity and the natives cannot work effectively without the immigrants, the wages for the immigrants increase. Empirical Evidence of the Impact of Immigrants to the Native- Born Workers’ Wages The relationship between immigrants and their impact on native-born wages is challenging to comprehend in the real world. Therefore, it is vital to incorporate studies conducted in various regions to assess this relationship. The studies used in the assessment are from the United States, the European Union, and Australia. The studies provide invaluable evidence on the complex relationship between immigrants and wages, which will be vital in determining whether the predictions from the model align with the empirical evidence. United States In the United States, numerous studies have investigated the relationship between immigrants and native workers’ wages. Early research on the issue portrayed a negative relationship, but the current studies provide more nuanced findings. According to the study conducted by Peri and Sparber (2009), immigrants had a generally positive impact on the wages of the natives. However, the impact varied across the skill levels, where highly skilled native-born workers experienced wage gains while the lowly skilled native workers’ wages plummeted. Also, the study conducted by Ottaviano and Peri (2012) concluded that immigration has a positive impact on the wages of native workers, especially those with complementary skills. The studies in the United States posit a positive relationship between immigrants with wages for highly skilled natives and those with complementary skills. European Union Numerous studies have been conducted in the European Union to assess the relationship between the immigrants and the natives’ wages. The study by Dustmann et al. (2016) highlights the negative impact of immigrants on native-born workers in the short run, but the impact is negligible in the long run. Also, the authors highlight that numerous factors contribute to the variation and that impact differs based on skill level and industries. Additionally, the study by Ortega and Verdugo (2014) concluded that immigration had an obscure negative impact on the wages of low-skilled native workers in some European countries but did not ...