This paper substantiates the insights espoused by Enrico Moretti that the level of economic success depends on a number of factors, such as: education, productivity, and salary. These factors related greatly to geography, that is, where you live and work (Moretti 3). According to Moretti, a worker’s educational level and skills will determine his salary and on the economic progress of other individuals around him/her. Depending on the geographic location, the economic success between two individuals shows significant variances. Workers in developed cities, where innovation proves to be the driver in labor productivity, earn up to three times more income as compared to workers in cities where innovation is at its bottom (Moretti 4).
At this point, Moretti is concerned with the exceptional redistribution of jobs, population and wealth across the American society, and may continue to heighten within the next years. In my perspective, human capital should be measured based on creative occupations rather than education only. The aspect of creativity relates to the worker’s cognitive and non-cognitive skills, and the propensity of the individual to recreate the conventional skills and occupations, into advanced initiatives that generate optimal economic growth.
Across the economics field, economists espouse that innovation prevails as an element of economic growth. Moretti’s argument is right since human capital is beyond formal education, on the fact that even with a substantial population segment with the first college degree or higher as their academic qualification, this education does not commensurate to their income or productivity. In most cases, these individuals are either unemployed or underemployed, and leading low life quality. Until these graduates acquire some experience and exposure to the real-time industrial operations, their relevance in contributing to the overall economic growth stands diminished. If the graduate acquires, the required skills and expertise, the individual is better placed to earn some income and contribute to the economic growth within his immediate geographic location.
As skilled workers move into a new geographical location for new economic ventures, the economic face of that region is lifted, depending on the economic choices made as well as to the level of innovation. It is noteworthy to reflect on Moretti’s claims on geographical clustering and concentration as the principal drivers towards innovation, firm foundation, and job creation. In his piece, he is bold to state that the quality of life in a city enhances the capacity of the city to attract new talents and innovations, which ultimately contribute to economic growth.
The aspect of human capital and geographic mobility therefore becomes manifest. In supporting, Friedman claims that your geographic location is inconsequential in limiting productivity. However, technology is an essential aspect of development. Florida bases his assumptions on the fact that technology has become a prime driver in linking the entire world into a global village, where capital and technology can be transferred from one part of the globe to another. However, this depends on choices: you either choose to remain close to your family and friends, and equally forfeit the economic opportunity, or move out and risk into a more promising economic venture.
Florida uses global maps on population growth, economic advances, innovation (as defined by the number of patents and registrations), and new scientific unearthing (with dense concentrations of scientists) as measures of economic productivity across the global regions. Florida’s maps present cities with high concentrations of human capital, but each of the region does not certainly rank high in the aforementioned categories (Florida 19).
For instance, the Taiheiyo Belt is top-ranked in innovation but tailing in scientific discoveries; and Indian and Pakistan cities exhibit high population densities, but poor in economic activity (Friedman 68). Therefore, the two authors encourage individuals to make wise choices on where to live, and reflect on the implications of those choices on their lives, happiness, and progress to their communities. I boldly suggest that in fact, places bear dominant influence over our jobs and careers we can ever access, the people we meet and on our interacting market, towards leading contented and fulfilled lives.
As globalization sets in, the major players in the business industry continuously adopt new strategies towards bolstering the economic performance of their firms. The offshoring strategies have dominantly marked the new trend among global companies, towards sustaining their competitive edge. Stanley Tool Works is one company that was studied to utilize this strategy on a substantial scale, after the firm showed tremendous declines in business sales and returns, which activated great employee layoffs and business, close downs across the late 19th century (Uchitelle 4-5).
My research points that the main contributing factors to poor economic performance arose from the severe economic depressions prevalent across the early 1920s, the huge economic turnover after the Second World War, intensifying competition from other tool manufacturing countries, and a demanding taxing system. Consequently, the firm tried to cushion the company from the poor economic performance by executing massive layoffs, successive replacements of the top management, and entering into mergers and acquisitions. Nonetheless, the economic situation did not relent.
Insights prove that remaining in New Britain, Connecticut, was only aggravating the poor economic situation. Initially, the company decided to mobilize its resources in other locations across the country, where the tax system and labor costs were more favorable. The decision to move set the company in areas like Carolina, Charlotte and in other Southern States where labor unions exerted a lower financial implication. It is apparent that in these new locations, the firm managed to reduce the degeneration of the capital asset, which was threatening any prospects to business survival.
The influx of cheaper tools (hammers, sledgehammers, screwdrivers, bolts, hinges, knives, planes and chisels) from countries like China, Taiwan and Japan compounded the economic damage (Fishman 4). Companies from these countries were providing these tools at a 40 percent discount rate as compared to the Stanley Tool Works prices.
Factoring the overwhelming competition, the firm opened offices in these Far East Countries, such as Thailand, while sourcing cheaper tools from China and Taiwan where industry operations were cheaper. With in-depth negotiations and forging new business contracts and relationships in these new locations, the firm managed to raise its operating profits from as low as 5 to 37 percent within 3 years.
Back in the year 2004, most of the electronic companies were struggling with redundant supply chains, high labor and production costs, limited technology and professional expertise. Apple was grappling with a strategy that would enhance its products (resilient products with high performance attributes), other peer electronics companies had already identified cheaper labor costs and high professional expertise in Asia.
Guiding the decision and prospects of relocation was the then Apple’s operations expert, Timothy Cook. Cook must have engaged on a keen market analysis. On the basis that companies in Asia have ample speed and flexibility in designing quality products, this would generate significant profits, and hence save Apple from losing its market share. The manager eventually settled on one cell-phone plant in Shenzhen, China, and presented the new bid, which was to enhance the subsequent cell-phone generations with a tough glass screen. On the basis of government grants on labor and glass manufacturing factories, Apple entered into a significantly subsidized operational contract, where labor and glass were provided at highly discounted prices (Fishman 6).
On the core fact that the United States educational system has fallen below the standards of training and nurturing competent engineers, I suggest that securing a competent technical workforce was considered a major setback. In the above glass-screen project, business analysts had predicted that it would take the company about 9 months to recruit up to 200, 000 assembly line of workers. Moreover, there was no guarantee over project delivery factoring the much slowed-down supply chains. In China, it only took 15 days to secure the workers, and besides a team of 8, 700 professional engineers, endowed with the latest electronics technology was availed.
On defending the offshoring strategy, many economists state that running the manufacturing processes in the United States would significantly cut on the current production, and result to massive declines in profits. In China, Apple affords to make up to 10, 000 iPhones on a daily basis, unparalleled to any production plant in the United States.
While the company was at its bottom and struggling to maintain its relevance in electronics by 2004, shifting its production strategy to China transformed the firm into a leading player in the electronic industry, with an unsurpassed revenue generation capacity rated at USD 108 billion. At this capacity, the company has improved the employment levels in both the United States and across the world, a possibility that would never have been realized had the retained the local-production approach.
It is evident that as firms struggle with poor economic performances, the decision to assess and implement a strategic move remains paramount in sustaining the business toward its survival and rejuvenation. Where the existing institutional framework serves as the main impediment to financial security and business survival, seeking a more conducive environment becomes the only remedy in sustaining the business from collapse (Bradsher and Duhigg n.p.).
With globalization as the new phenomenon across the global economy, companies are continuously investing on the offshoring strategy, in bid to evade exploitive policies and to attain the desired level of production, and more so to generate the projected revenue margins. Therefore, the aspect of location and innovation prevails significant in the light of business continuity, economic productivity, income and salaries, and the multiplier effect across the community.
As a financial intern at Sunshine Pharmaceutical Company, I feel that the prevalent policies that govern the running of the pharmaceutical industry in New York State has significantly contributed to poor financial performance among the pharmaceutical firms. The protracted waiting time in the processing of orders due to bureaucratic intra-office procedures, a high taxation and levy system on all imports, and unexplained delays in the delivery of orders, have rendered the business activity ineffectual in serving our clientele.
Considering a taxation system that is rated 39 percent higher than the national average rating, relocating the business to Florida, one of the States that has the most conducive taxation system on medical implements. The state has eliminated the state income tax, which considerably reduces the average tax bill on the investors and the clients. Moreover, the company is seeking to establish procurement procedures with an Indian-based pharmaceutical company, which runs on the lean manufacturing and procurement practices, with speed and flexibility in order processing (Fishman 14). Under the new geographic arrangement, our company is set to reduce the inventory costs by up to 23 percent and overall budget by up to 33 percent.
There are reasons to rethink the measurement of regional human capital. Basing this element on labor and education economics, the education measures often capture the human capital imperfectly. The cognitive and non-cognitive skills, that is, intelligence and personality, shape the human capital immensely and are independently valued in terms of higher productivity and income generation (Moretti 72).
With regional divergences in educational skills, innovation and financial segregation becomes evident across the world. Communities that fail to attract skilled workmanship lose their ground. Consequently, the regional aggregate skill composition exerts powerful influence on the individual and communal income, as well as to the quality of life among the immediate communities. Therefore, this relationship can be used to explain why education is a vital subset of innovation, while innovation propels productivity and income.
Works cited:
Duhigg, Charles & Bradsher. How the U.S. Lost Out on iPhone Work? New York City: New York Times, 2012. Print.
Fishman, C. "The Insourcing Boom an Exploration of the Startling, Sustainable, Just-Getting-Started Return of Manufacturing to the United States." Atlantic Monthly. 310.5 (2012): 44. Print.
Florida, Richard L. Who's Your City? How the Creative Economy Is Making Where to Live the Most Important Decision of Your Life? New York: Basic Books, 2008. Print.
Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-First Century. New York: Farrar, Straus and Giroux, 2005. Print.
Moretti, Enrico. The New Geography of Jobs. Boston: Houghton Mifflin Harcourt, 2012. Print.
