Question

Be sure to address each point in the question and explain your argument carefully.

6. Are industrial countries losing jobs to developing counties? If so, what policies would you recommend minimizing the impact?

Answer 1

The answer is Yes, industrial countries are losing jobs to developing nations. The reasons for this can be outlined as follows -

1.) Cheaper labour: The first and the most important reason why the industrial nations are losing jobs to the developing nations is because the firms can get labour at cheaper rates in these developing nations. These developing nations have huge populations which forces their poeple to have very low reservation wages. In addition, labour laws are not so well formulated in most of these nations and because of that employers do not have to pay for healthcare or other benefits that they have to pay for labour they hire in the inductrial nations. This greatly reduces their labour costs and hence, most firms prefer outsourcing or offshoring their operations so that they can hire the cheaper labour that there nations have to offer.

2.) Excess capacity in the economy: Most of the developed nations are working at almost full capacity and have limited scope of expansion. On the other hand, the developing nations are working at below full capacity and it is easier and cheaper to expand operations in these nations than in the industrialised nations. This is because there is immemse capacity lying idle in the developing nations and harnessing this can lead to growth of the firms much more than what they could grow in the industrialised nations.

To minimise the impact of this, there have to be strict regulations regarding the firms in the market. Some of them can be as follows -

1.) Licensing the firms should require them to employ at least 50% of their employees from the country in which it is getting the license.

2.) Education should be strengthened in these industrialised countries so that their labour is more qualified and better skilled to work, which will automatically make firms hire them

3.) Labour laws should be strict, but formulated in such a way that does not discourage firms to hire labour from the industrial nations.