Problems of Workand the Economy

Chapter 12

The American Free-Enterprise System: Key Trends

• Capitalism is an economic system based on a free market for the regulation of the production of goods and services

• The central social institutions of capitalism are markets• Competition among providers of goods and services is

another cornerstone of capitalism• Capital refers to:

» Equipment and assets» Money » Hourly and salaried workers

The American Free-Enterprise System: Key Trends

• A capitalist who creates a new business is referred to as an entrepreneur

• Many businesses are formed into corporations which minimize the liability of the owners

» Owners of corporations have limited liability - economic failure does not result in the liquidation of personal assets

Global Markets and Corporate Power

• The trend has been toward economic globalization

» Economic enterprises that engage in business activity around the globe

• The global economy of today was brought on by two social forces

» Modern speed of communication» Modern speed of transportation

Multinational Corporations

• Multinational or transnational corporations are corporations that operate in a number of countries

• Multinationals have their headquarters in one country while operating business activity in other countries

• There has been a significant growth of multinationals since WWII

Multinational Corporations

• Multinationals often move to where costs of production are low and shift profits to where tax write-offs are high. This is known as outsourcing.

» Loss of jobs in developed countries where labor costs are often higher

» Contribute to poverty in developing countries by shifting profits out to more developed countries

Global Factory, Global Sweatshops

• Multinationals have been transforming the world’s economy

• One development has been the global factory • Two factors have made possible the globalization

of production» 1. High speed transportation » 2. Component production

Global Factory, Global Sweatshops

• Two issues related to the global factory are» Outsourcing of work and the loss of

jobs in America» Sweatshops and the hiring of child or

prison labor

Effects on American Workers

• Decline in the number of employers and the concentration of markets by large corporations

• Export of capital and jobs overseas• Biggest job losses have been in manufacturing

» In industrial cities of the Northeast and Midwest

Effects on American Workers

• There have been three major changes of labor force in America due to the global economy

» 1. Shift from manufacturing jobs to service jobs

» 2. Increase in the number of women in the global labor force

» 3. Emergence of new technologies and unprecedented economic growth in the last ten years

From Manufacturing to Services

• Decline in farm employment• Decline in blue-collar employment• Growth in white-collar employment• There has been a shift away from manufacturing

jobs to jobs within the service sector of the economy

From Manufacturing to Service

• The shift in manufacturing jobs to service jobs has resulted in a decline in union membership

» In 1960, 27 percent of employees in the private sector belonged to a trade union; today that figure is about 9 percent

• Another trend in the shift from manufacturing to service jobs has been the growth of contingent work - work not based on a written contract with regular hours

Women in the Global Labor Market

• Labor force defined - 16 years of age and over who worked one hour a week or over or are out of work and actively looking for work during the survey week

• Major change is the growth of married women and the exclusion of older men in the labor force

• Today there are more than 130 million in the labor force

» Women comprise well over 40 percent of the labor force

Women in the Global Market

• Approximately 6 percent of both men and women hold multiple jobs

» Most multiple job holders hold two or more jobs to pay bills

» Many hold two jobs because of part time work and the lack of a full time job

• Women work part time because of:» Schooling» Family and the lack of affordable

childcare

Technology and Specialization

• Economic growth in the U.S. was fueled by a number of new technologies

» Computers» Telecommunications» Biotechnologies» E-commerce

• There has been a rapid growth in the application of computers to work

Technology and Specialization

• Technology• Computer and telecommunications technology has

lead to the creation and growth of» Internet-related businesses

• Internet commerce has led to the shift of jobs from a central location to home-based self-employment enterprises

• New technology will lead to job losses in traditional industries

» Jobless future

Technology and Specialization

• Specialization• Specialization of work has a number of

implications:• 1. Lower echelon workers trained in single tasks

that lose their jobs will find it difficult to locate new ones

• 2. Single-task workers will feel more and more like automatons - just a cog in the machinery of work

Technology and Specialization

• Specialization• Specialization of work has a number of

implications:• 3. High level mangers will face ongoing problems

of coordination and cooperation among their employees

Problem Aspects of Work

• Computer control of work affects workers in that they are under a hidden system of supervision

• Computer control of work alters the structure of the work organization

» Interdependence between workers and computer specialists with different roles and goals in the organization

• Computers may contribute to job dissatisfaction

Job Insecurity and Unemployment

• The economic downturn in the financial market along with the events of September 11, 2001 have led to an increase in job insecurity

• Loss of blue-collar jobs• Loss of managerial and professional jobs

» Long term unemployment» Many have experienced downward

mobility

Job Insecurity and Unemployment

• The Changing Nature of Employment• A striking feature of the years from 2000 to 2006 was relatively high employment rates and consistently low unemployment.

• There is growing insecurity about declines in “good jobs.”

Job Insecurity and Unemployment

• The end of the high-tech investment bubble in 2002 and the rash of mergers and acquisitions in many industries have caused more economic insecurity.

• Unemployment is related to:» Psychological and social harm

• Intermittently Unemployed and Chronically Unemployed

• High school drop-outs• Minority groups • Teenagers • Unskilled

Job Insecurity and Unemployment

• Frictional Unemployment and Permanent Displacement

• Temporarily between no job to job loss or change• The Invisible Unemployed and the Discouraged

Worker• Out of work but not looking for work • Have become discouraged in finding a job

Job Insecurity and Unemployment

• Consequences of Unemployment

Loss of status and esteem

Social isolation

Emotional and psychological change

Family and economic problems

Job Stress

• Job stress is related to a number of conditions of work, some of which are:

» Irregular work loads» Uncertain work expectations» Loss of control over the pace of work» Poor social environments» Job insecurity

Alienation

• Alienation from work is reflected in the inability to express one’s self in their work

• Several elements are related to alienation of workers today

• 1. Clash between people’s self-image and their jobs

• 2. Jobs that offer little opportunity for personal judgment

• 3. Being closely supervised

Alienation

• Attempts to Make Work More Satisfying• 1. Improving human relations and focusing on the

social context of work• 2. Flexible schedules - flextime• 3. Opinions count at work• 4. Opportunities to socialize more freely at work• 5. More breaks

Occupational Safety and Health

• Most dangerous occupational categories are:» Mining» Agriculture,forestry, and fishing» Private-sector construction» Transportation

• Occupational illness and the exposure to chemicals in the work place has become a growing concern - the greatest health hazards come from the chemicals industry

Consumers and Credit

• U.S. economy is based on consumerism• Effects of a strong emphasis on consumption has

been• An overemphasis on materialism and reducing an

individual down to the sum of their material toys as a measure of self worth

• Dominance of large corporations and franchises and a decline in small businesses

Problems of Debt Entanglement

• Transformation from a cash to credit society» Increase in consumer debt» Debt and bankruptcy

• Many bankruptcies are due to» Divorce» Medical expenses» Loss of financial investments

Problems of Debt Entanglement

• Proposed solutions to debt and bankruptcy entanglement are:

• More careful monitoring of consumer debt and income ratios

• More regulation of banking and finance

Corporate Crime and Business Failure

• Growth in corporate crime and its impact on business

» Failure of Enron is a classic example• Reasons behind corporate crime are related to:

» Corporate compensation» Corporate culture among the elite

Social Policy

• Two major factors have altered the world economy

• Global terrorism• Globalization• Policies and politics will focus on issues of free-

trade and the expansion of markets» NAFTA» Most favored trade status of China

Social Policy

• Policies and politics will focus on issues health insurance and benefits for workers

• Reform of welfare laws» Welfare to work policies

• Policies and politics will focus on issues of regulation and deregulation of sectors of the economy