Chapter 1: Introductory Concepts

http://money.cnn.com/2009/09/04/news/economy/jobs_august/index.htm

SUMMARY

As North America and other parts of the world are facing an economic recession; many workers, especially in the United States, have lost their jobs. In August, employers laid off fewer workers than they did in the previous months; 216,000 workers lost their jobs as compared to 276,000 in July. Even though they managed to reduce job losses; just two weeks ago the unemployment rate in the States jumped to a 26 year high of 9.7%. The last time the employment rate was this high was back in June of 1983. It is estimated that 6.9 million workers have lost their jobs since August 2008. Some people without jobs had lost hope and left the work force which caused the unemployment rate to drop last month.

CONNECTION

In chapter 1, we looked at the scarcity of resources, direct cost versus opportunity cost, and production possibility curves. First, the three resources used to produce goods and services are land, labour, and capital. When jobs are scarce, companies lay off workers which cause an excess amount of labourers. Second, laying workers off only require a direct cost of compensation by offering their employees severance pay packages according to the years they have been working for the company. But the opportunity cost could be higher as business rebounds and the company has to spend money hiring and training new employees or re-contracting ex employees. Third, when there are less workers the production possibility curve of a company decreases and shifts to the left. Fewer workers mean less production which in turn can hinder the company’s recovery process.

REFLECTION

In times of recession, companies have no choice but to reduce their expenses and lay off workers. The process of resigning employees gives the company instant feedback and cut in costs. But what about the hidden costs of laying off workers? When workers see that their peers are being laid off, it creates an environment of fear within the organization. Fear leads to reduced productivity and creativity of current employees and increased health issues due to the stress. Also there will be a lost of experienced employees when business returns. As I have mentioned in the connection, it costs more time and money to hire and train new employees rather than keeping experienced ones. Another downside of laying off workers is that it causes a vicious cycle of expenses. When consumers cannot afford to spend money on goods, the companies producing these goods are not profiting either. So what are some possible solutions to this issue? Companies can cut down on their employees work hours by giving them a shorter work week, eliminate working overtime, and last of all offer unpaid vacations. Until companies and corporations discover real solutions to the issues regarding worker lay offs, labourers will continue to lose their jobs.