Welcome to class of Economic and Labor Forces

byDr. Satyendra Singh

University of WinnipegCanada

Learning 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

Objectives:

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 ConsumptionDisposable income

after-tax personal income

Discretionary incomeincome left after paying taxes and making essential

purchases

Dimensions of the Economy…

Unit labor costs Total direct labor costs divided by units

producedCountries 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 TrendsAging 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-bornPopulation comprises those immigrants whose

move is permanent and may include taking citizenship

ForeignPopulation 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