Impact of Globalization in the United States Economy.
Globalization is perceived to be an international integration process emanating from world views, ideas, products and transformation of cultures. It has greatly been influenced by infrastructure in areas such as communication and transportation. There are four aspects of globalization that must always be considered. Globalization must have investment and capital flow within the economy, transactions and trade records, spreading of knowledge and easy movement of people within the world.
The impact of globalization in the American state is widely discussed in Washington. The major part of the debate is about the macroeconomic effects of gross domestic product deficit due to trade. Effects have now been felt on the macroeconomic part of the economy due to increased trading with the developing countries and China. A recent study in 2013 by the Economic Policy Institute, showed that as labor intensive industries migrated to the less developed countries, the United States labor force reduced. This, particularly, affected the uneducated college workers. Globalization has had the effect of demand of more professionals in the American economy, leading to a wide gap between the poor and the rich (1).
According to the United States Department of labor, the case of immigration of low skilled workers has led to economies of scale in many firms in the United States. It has resulted in the supply of more labor, which has affected the distribution of wages leading to a severe wage inequality. Firms have been forced to offer goods and services at lower prices, and this translates to low incomes for the unskilled workers. The cause for this was in the concentration of low skilled immigrant workers who did not correspond to the added capital. This led to the immigrants gaining more than the native born workers. Foreign investment is also another indicator that affects the average wages of USA citizens. It weakens the strength of the work force resulting to low wages at the expense of outsourcing highly skilled labor (1).
The United States government has many ways of promoting and regulating competition. In the build up to the wage disparities exhibited, it played a role by allowing and engaging in global trade through importation of labor intensive services, which led to many of its citizens leaving the manufacturing sector for other sectors. It also offered startup capital for businesses to the people who shifted from the manufacturing sector further causing wage inequalities. The government increased tax rates have also led to the reduction of funds available for private and business spending. This has made firms to reduce wage rates in order to make profits. The unemployment rate has also risen up leading to a low recovery of the market labor force due to shifting to service sectors.
The graphs below show an estimated employment gain that was expected and never met in 2013. Only 148 000 increase was achieved instead of the targeted 180 000 in both private and government firms.
Government spending has nevertheless increased. This led to increase in demand of goods and services that later led to increased employment and production. This only benefitted the highly educated in the country, thus, raising their wage income while the non educated colleagues were left without proper jobs.
A study by the Economic Policy Institute showed that in 2011, the results of international trade cost the workers an average of 1 800 United States Dollars rating to about 5.5% decrease. Bivens, who was the director of the study, believe that, the overvalued U.S dollar impacts negatively on wages. This has made exports to be expensive, while imports cheaper. He further explains that because of foreign competition, workers are driven out of manufacturing into other sectors like service industries. This leads to further wage losses. The graph below shows the number of discouraged workers who shifted to other sectors while the unemployment rate continued to increase.
Graph of the Economic Policy Institute continue to share about the increasing unemployment rate to be over three million. The number of discouraged workers experienced a slight reduction while active labor participation stood at above 60%. Economic policies issued by the government also have drastic measures on the rate of unemployment in the USA.
