Controversy of Cheap Labor, Globally Competitive Market Place (Research Paper Sample)

Controversy of Cheap Labor
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Controversy of Cheap Labor
Introduction
In an increasingly global marketplace, businesses are constantly looking for new ways to reduce cost and increase revenue in a bid to report high profits. High profits ensure that investors receive a high Return on Investment (ROI) when the dividend payout is declared. The practice while fostering and creating a climate for cutting corners and unethical practices, it is by no means illegal. Shareholders want to receive the highest return possible in the shortest period possible. The emphasis on short-run profits results in companies adopting strategies that pay off in the short run but result in bankruptcy, winding up of companies in the medium term. Michael Dell noted the trend and chose to take the company private in a bid to save it from short term investors. A year after taking the company private, Dell notes that the move worked out for the company especially with the current myopic view of the market by stakeholders CITATION Mic14 \l 1033 (Dell, 2014).
A result of the cost cutting measures by global corporates is their preference for cheap labor in creating products or services. Nations that offer cheap labor have seen a significant increase in global companies using cheap labor to create their products. In the past decades, China was the main source of cheap labor. India played a particularly important role with other nations of the Far East acting as the world’s workhorse. China is, however, shaking off that role as it comes into its role as a global powerhouse. China has ridden on the back of cheap labor to give it a needed boost into economic superpower status CITATION JIA15 \l 1033 (YANGON, 2015). The Bureau of Labor Statistics notes in its International Labor Comparisons that China between 2002 and 2009 had some of the lowest wages for employees in manufacturing globally CITATION Uni13 \l 1033 (Labor, 2013). This ultimately gives China an advantage in the global labor market. Ethiopia, a nation in Africa, now seems to be taking over the role of China. A nation with millions of unemployed youth and a government system that is to an extent closed off from the global system. It seems to be following China's playbook. However, is cheap labor truly an advantage in the global marketplace CITATION Kev14 \l 1033 (Hamlin, Gridneff, & Davison, 2014)?
The paper will conduct an in-depth assessment to determine the exact nature and supposed benefits of cheap labor. The paper will determine the impact of cheap labor to the national economy and the subsequent interaction between that and the standard and quality of life for workers. The paper will focus on the plight of workers who provide cheap labor.
In examining the effect of cheap labor on the standard of lives of workers, there is the need to conduct a broad assessment of the body of work that exists about the subject. Such an examination enables researchers to understand the subject better, avoid pitfalls previous researchers encountered and avoided replication of studies. In this regard, the researchers will within the context of the theoretical framework dissect different outlooks on the subject from different authors.
The labor theory of value is a labor theory that is built on the premise that the cost of a product is determined by the total amount of labor used in producing it. The premise is in contrast to the view held by some that the cost ought to be determined by the amount of please a user derives from a product (theory of price) CITATION The15 \l 1033 (The Socialist Party of Great Britain, 2015). Cheap labor is a function of global businesses attempting to raise profits by adopting low-cost strategies. Low-cost country Sourcing is a strategy that allows companies to import products from countries where labor cost is low. In such a scenario, the company will identify a country e.g. China and transfer its manufacturing facilities there since labor cost is low. The process of low-cost country sourcing is made up of nations that have different needs. One nation has adequate resources, and the labor market is heavily regulated and protected by trade unions. These nations are typically western nations. The other nation features limited labor market regulation and scarce resources. The transfer usually occurs from the nation with scarce resources to the other. It enables rich nations to access cheap labor at below market rates. Cheap labor can also be a result of an influx of people into a nation e.g. illegal immigrants in the United States or refugees from the Syrian was into Turkey. In these scenarios, the individuals are willing to access below market wages.
Cheap labor has a powerful multiplier effect on the global economy. In allowing global businesses to access cheap labor from developing countries. An incentive is created to create better infrastructure to move products from the developing countries to the market. Countries such as Ethiopia benefit from Mega infrastructure projects as they possess a resource western nations do not have; a young and growing population CITATION Kev14 \l 1033 (Hamlin, Gridneff, & Davison, 2014). Africa is reaping from the cheap labor resource with some touting the current trend towards China as a new drive towards neo-colonialism. Developed nations are looking for new ways to further reduce their overhead costs. Africa is looking for investment and especially foreign direct investment. It is a win-win stratagem.
Cheap labor drives growth across multiple sectors of the economy. By attracting investment from foreign companies. These companies will invest in sectors such as education and health to ensure the health of their employees and as part of the social responsibility programs. Government spending in such sectors will typically not have a corresponding growth in the economy. Developing nations cannot afford this, thus the need for investment that is attracted by the labor market. Education creates a path for sustainable development in these nations.
Cheap labor is essential in driving innovation and creativity. In a world where innovation ensures the sustainability of business, it is crucial to invest in research and development. As such, it is crucial to ensure that funds are efficiently used to allow this. Cheap labor frees up cash flow into research. Apple Inc. Utilizes cheap labor in China to produce its IPhones. The company by making this decision ensures that the product remains competitive in the market. It also ensures that its core employees restrict themselves to work that is core to the business. Apple Inc. is a leader in the smartphone industry; it rakes in billions in profits each year. A significant part of the revenue collected goes into research, to produce the next product that will capture global consumer attention. CITATION CHA12 \l 1033 (DUHIGG & BRADSHER, 2012)
Cheap labor is essential in driving poverty out of nations especially less developed countries. While opponents of globalization assert that the transfer of low wage jobs from developed to under developed countries contribute to poverty. These opponents fail to appreciate that prior to globalization, the citizens of these nations had no source of income. Globalization will naturally lead to rural to urban migration as people stream into cities where factories are located. The resultant social crisis as pressure mounts on social amenities will give credence to opponent of globalization and cheap labor. However, such crises are a result of poor planning. Where governments plan and anticipate the need of their citizens, globalization becomes a powerful tool in escaping from poverty. Globalization allows under developed nations to take advantage of their labor resources. A resource that developed nations do not have or is unwilling to utilize. The results are a key demographic of the population (the youth) gainfully employed and contributing to the economic growth of the nation. Social ills such as crime, prostitution will ultimately go down. The nation will rise from abject poverty and claim its place within the community of nations CITATION Pau97 \l 1033 (Krugman, 1997).
In a globally competitive market place, cheap labor offers an attraction for global manufacturers. Manufacturers need cheap labor to produce their good at minimal prices and make reasonable profits. Manufacturers will therefore move their manufacturing facilities to be as close to the labor market as possible. As more and more manufacturers move into a manufacturing district, other service providers are attracted to the region e.g. Banks, insurance companies, security firms. The ripple effect on the economy is substantial. The pressure on natural resources reduces tremendously. Therefore, environmental degradation, depletion of forests are discouraged CITATION Hil15 \l 1033 (Lumba, 2015). Cheap labor becomes a catalyst for the protection of natural resources. Governments and International agencies are increasingly aware of the need to ensure the global population has access to tools of production CITATION Dai15 \l 1033 (Daily Trust, 2015). In ensuring, that the population can gainfully fend for themselves, there will be a proportionate reduction in the need to exploit the environment for gain CITATION Nat \l 1033 ( Natural Resources Management and Environment Department, n.d.). However, it is important to note that cheap labor that is below the market standard to meet the consumption need of individuals may have a converse effect on the environment.
The economist in a 2011 article asks a potent question. Whether nations are poor due to violence or violent due to poverty CITATION The11 \l 1033 (The Economist , 2011). The article is an indictment of the cycle of violence that exists in nations that results in a continued state of poverty. Cheap labor provides a unique antidote to thi...