Economics: Globalization and the Decline of the Family
on business. And Wall Street is right.\r\nThe core of the domestic social problem\r\nis linked to the international restructuring\r\nof the economy, though obviously\r\nthis is not its only cause. Economic theory\r\ntells us that full employment can be\r\nreached at any level of income, and will\r\nmove toward this equilibrium in the absence\r\nof external shocks if the labor market\r\nis flexible enough. "Flexible" means\r\nthat wages must be capable of moving\r\ndown as well as up, to keep production\r\ncosts down when the markets for the\r\nproducts are fiercely competitive â€”as\r\nglobal markets are. Indeed, the stock\r\nmarket has tended to drop in reaction to\r\nany announcement that wages are rising.\r\nThere are several ways to make wage\r\ncosts flexible downward. Within a domestic\r\nindustry, wages for existing positions\r\ncan be constrained. On an interregional\r\nor international level, jobs can be\r\nshifted to other labor markets where\r\nequilibrium wages are lower (and the\r\nthreat to do so can be used to suppress\r\nwage increases at home). In terms of the\r\ntotal economy, the mix of jobs can be\r\nchanged to one favoring low-wage work.\r\nAll three have occurred in the United\r\nStates.\r\nIn the manufacturing sector, employment\r\ndropped by 2.5 million positions\r\nbetween 1979 and 1997. The sector\r\nwhich added the most jobs (7.1 million)\r\nduring this same period was retail sales.\r\nThe typical manufacturing job pays double\r\nthat of retail sales...
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