Discussion Feedback | Custom PHD Thesis

Respond with a question about their post, followed by a 3 to 4 sentence response to each discussion based on facts. Make sure that you reference anything you use.

4 Discussions, 4 Response Questions and 4 Short Reponses.

Original Post

For Week 6 you will find two topics. Select one topic, then post and concisely defend your view. You may post to both topics, but are required to only select one for your initial post. Be careful to identify the positive reasons for your normative position. Read and respond to your fellow student’s postings at will. The topics to choose from are:

1. Examples of Outsourcing. Identify one example of outsourcing that you have observed or desire to research. Be certain to apply the economic analysis of Chapter 28 in your post and tell us what you believe was the most significant economic factor in the outsourcing you described. Examine the labor and product markets involved. Lastly, should there be any changes you would favor to any laws or regulations that accommodated the outsourcing?

2. Determinants of Income Differences. Identify one of the determinants of income differences as enumerated in Chapter 30 which you have personally observed or desire to research. Be certain to tell us what you believe was the most significant economic factor in determining the wages for the labor market you selected. Lastly, should there be any changes you would favor to income policies and why?

Note: A post that merely recites an example without offering economic analysis or responding to the questions assigned, garners few points.

Discussion # 1

Taylor Marshall- Discussion 4 Post

An example of outsourcing in today’s market is the Japanese Auto Industry building cars in America. We can define outsourcing as employing labor outside of the country where the firm locates out of. Honda/Acura, the automobile company, was founded in 1948 in Japan. These cars were manufactured in a foreign country and later came over to the U.S. to manufacture more cars. There were multiple economic factors that were significant in Honda/Acura migrating part of their company to the U.S. Assemblage became more efficient because the cars are made here. The distribution costs are substantially lower because according to Honda, “97% of Honda/Acura vehicles sold in the U.S. in 2014 were manufactured in North America.” By having Honda being located here, it allowed American consumers to purchase foreign cars in their own country. Labor costs are not a definitive reason to build cars here in America, because the difference of labor cost between Japan and America is only separated by .2%. Whereas there is not a substantial trade balance between the U.S. and Japan (76 billion in 2012), things are very different between the U.S and China. Our trade deficit totaled nearly 500 billion dollars in 2014. There is discussion in the political world of creating an import tax on goods imported from China. China, for example, has such a tax. Actions like this could embark the U.S. on a global trade war not seen in over a hundred years. The result of this could be less goods sold over seas, because trade wars don’t benefit anybody in the end.

http://www.hondainamerica.com/manufacturing

http://www.bls.gov/news.release/pdf/ichcc.pdf

Response:

Discussion #2

Richard Sanders Week6 Discussion4-Detroit Auto Industry

The Detroit Auto Industry is a prime example of how outsourcing can effect a city and a country. Detroit is famous for its automotive manufacturing and most of its population served as the labor force in the auto industry in one way or another. But we all know what happened to this industry… it went bankrupt and was bailed out by the government. However, many laborers still felt the impact of unemployment and the city has lost more than half of its population and even the City of Detroit filed bankruptcy.

Some boast that the free trade laws such as NAFTA: North American Free Trade Agreement, WTO: World Trade Organization and and the introduction of foreign cars into the American market are to blame for making the production of automobiles so expensive that major manufacturers like GM and Chrysler were forced to outsource.

Other contributors such as political moves by the Reagan administration to overthrow the Antitrust Law in 1981 are considered to have empowered the formation of a “bottom-up monopoly” of parts suppliers to the major auto manufacturers (prospect.org). This caused a shift from traditional methods of supply to begin outsourcing and consolidating entities that created a severely interdependent industry structure that was the ultimate demise of the entire industry. Much like a house of cards, when one went bankrupt, they all tumbled.

The industry was bailed out, however as of GM’s 2011 Annual Report, “GM outsources almost two thirds of its jobs overseas. Less than one in five GM vehicles are manufactured in the United States.” (forbes.com). About 74,500 of 200,000 GM jobs are in the United States, the rest are outsourced. This obviously had a major impact on the labor force and the population of the City of Detroit. “In fact, about a third of all Detroit has now been abandoned, and the population of two million has plummeted to a mere 714,000.” (economyincrisis.org).

I’m no expert on labor laws or political moves, but I’m sure some kid of change is better than no change in policies to help bring jobs back to the U.S.

Works Cited:

“How Detroit Went Bottom-Up.” The American Prospect. September 19, 2009. Accessed February 17, 2016. http://prospect.org/article/how-detroit-went-bottom.

“How Free Trade Agreements Crippled Detroit | Economy In Crisis.” Economy In Crisis RSS. November 18, 2013. Accessed February 17, 2016. http://economyincrisis.org/content/how-free-trade-agreements-crippled-detroit.

“Outsourcer-In-Chief: Obama Of General Motors.” Forbes. August 12, 2012. Accessed February 17, 2016. http://www.forbes.com/sites/paulroderickgregory/2012/08/12/outsourcer-in-chief-obama-of-general-motors/#240ed22c347e.

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Discussion #3

Robinson 4 Outsourcing

At my day job, I am a systems administrator, so many days I have to call the company that created/supports this software. A few months ago, they changed their support structure by outsourcing some jobs to (I believe) India. Now when I call with questions about one of my applications, I speak to an outsourced employee. If I am calling with questions on a second application (I support two), I speak to one of the stateside guys as usual. Normally I would say that the main reason that BMC (the company in question) did this was to save money by paying workers in another country less than what they would pay workers here. As the graphs on page 656 illustrate, this would end up lowering the average wage of American workers in this field while raising the wage of the workers in India. However, that presumes that the workers hired were replacingUS workers. I do not believe that is the case here.

When BMC made this shift to using outsourced workers, they also restructured their call department. The new outsourced technicians did not replace any the people I usually ask for help. Instead they take my information, log my problem in a ticket and that’s all. This allows the guys that used to take the incoming calls (and then trouble shoot the issues) to work out of a queue of incoming issues. There seems to be the same number of guys supporting both applications (so BMC basically created a new job function and let the team who supports application ‘A’ focus on that (instead of splitting their time answering the phones).

The labor pool obviously increased; and if the product that the call center is providing are “software resolutions”, this outsourcing allowed BMC to increase the number of resolutions they generate. I do not have hard numbers available to talk in terms of marginal product increases; but I would say that the first outsourced technician provided a substantial increase in daily (or weekly) software resolutions, and so did the next outsourced tech. The marginal increase would of course level off though (because eventually there are too many guys answering the phones and not enough calls coming in).

Response:

Discussion #4

Discussion 4 – Boubacar Ndiaye

Outsourcing refers to having part of a Company’s work to be accomplished by workers from another country or another company. The outsourcing case I would like to discuss is Apple. Apple has been very successful with the IPhone. Apple have contracted Foxconn to assemble the iPhones in China. Foxconn is the world’s largest electronics contractor manufacturer and employs over 230,000 Chinese workers. Apple could have those 230,000 job opportunities here in America but chose to do in China because of the cheap labor. President Obama once asked Steve Jobs about those jobs and his answer to that question was that “those are not coming back”. Outsourcing was a necessary move for Apple to sell the iPhone and be profitable. Back in 2010, the average manufacturing wage for a worker in China was only $2.00 compared to $34.75 for an American worker. If the iPhones were made in the U.S, the labor cost would have been around $25 Billion. If you consider that Apple had a profit of $14 Billion that year, the company would have gone out of business. By outsourcing the jobs to China, the supply of labor for Chinese workers increased and also the wages which were still lower than the wages in America. In the U.S, the supply of labor decreased and so did the wages for the workers to assemble the phones.

To be able to survive selling the iPhones, Apple could not afford to employ U.S workers to assemble to products. By outsourcing the portion of the manufacturing of the iPhones, Apple was able to be profitable and also offer jobs to a lot of engineers for the design of the phones, some professionals for the marketing and the sales associates in the U.S.

The laws and regulations I would like to see would be take a look at the working conditions of the workers in the foreign counties where those jobs are outsourced. OSHA is in place in the U.S to prevent employers from abusing the workers. Apple was aware of the horrible conditions Foxconn put its workers in and did not do anything to change it. In an article form the New York Times, one of Apple executives said ” We have known about labor abuses in some factories for four years, and they are still going on…Why? Because the system works for us.” (Times, 2012). The companies have the ethical responsibility to make sure the workers are treated fairly. Over 300 Chinese workers have threatened to commit mass suicides over horrible working conditions and pay disputes.

As far as the outsourcing business decision, I don’t think we can blame companies for doing so. I do not think that the outsourcing companies have an obligation to create jobs in the United States. A business’ purpose is to make profits but a business also has the moral obligation towards the employees whether they are locals or in a foreign country.

http://www.valuewalk.com/2013/08/apple-inc-aapl-outsources-work-to-china/

http://www.forbes.com/sites/forbesleadershipforum/2012/01/25/the-real-reason-the-u-s-doesnt-make-iphones-we-wouldnt-want-to/#43ea91354bde

Response:

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