JOBS IN THE US

Why Jobs are exporting from the US

[Name of the Institute]

Why Jobs are exporting from the US

Introduction

The job market and number of jobs available in a country marks the effectiveness of a particular country and its economy. The labor market is affected along with the economic cycle. As inflation begins to rise in a country, the government responds with reducing the supply of money through its monetary policy. With lack of money in the market, overall investment drops and so does manufacturing. As production in an economy drops, employment opportunities are reduced. However, this article does not focus on the economical cyclic unemployment but the export of US jobs in foreign market and its effects on employment in the US.

The Impact of Globalization

According to many analysts, loss in manufacturing jobs is occurring due to outsourcing and globalization. Globalization has resulted into increase in mobility of capital, technology, services and Labor throughout the globe. Outsourcing is defined as performing some operations in foreign country.

With the emergence of global village, most of the trade barriers were opened and countries were provided with easy access into global markets. This global trade was not limited to trade of goods and services, as companies started to manufacture in the host country to achieve economies of scale. As the benefits of outsourcing became obvious, many American manufactures built factories in foreign land and many jobs were outsourced abroad. The trend is still increasing, so much so that many analysts believe the trend of exporting job would continue to rise in future.

Mexico was the most benefited country with the drafting of NAFTA (North American Free Trade Agreement) in 1994. Many US jobs were exported to Mexico. Today, Mexico is considered as one the biggest Television set producer and leader in the manufacturing of auto parts. The new agreement CAFTA (the Central American Free Trade Area) means that many new jobs will be exported across border. Many US giants such as Maytag, Sara Lee/Hanes, IBM, dell and others have planned to move business abroad.

It is very easy to understand why companies export jobs and manufacture outside the country. The overall objective behind such strategies is to reduce the cost of manufacturing and achieve competitiveness of cost. In order to comprehend the cost related concepts, let's first discuss some economic concepts (Bernard et.al, 2003).

Economies of Scale: Average vs. Marginal Concept

A marginal cost is the change in total cost that results when the quantity produced changes by a single unit. It represents the cost of producing additional item of a good.

Average cost is the total cost per total quantity. For example, if a business is operating with three machines and total cost of operations is £3 million, and it serves around 100 customers per day than total average cost per customer would be £30,000. Now, if the business adds another machine to its operations and now serving 150 customers, total cost would rise, let's say £3.5 million and average cost per customer would become ...