Apple: The relationship between unemployment rates and outsourcing

Apple: The relationship between unemployment rates and outsourcing

By: Casey R. Miller

Apple Inc. is an American company that creates and sells electronic devices. Apple is famous for their various MP3 player products like the iPod, iPhone, iPad and iPod shuffle. In the computer market, Apple is known for their best selling computer, the Mac. When Apple Inc. comes out with a new product, the company puts out a limited supply of the gadget in order to keep the demand for the products high. This acts as a way for people to buy the device not only as soon as it is released, but also so the customer will purchase it at a high price that would still seem reasonable. The loyalty that Apple has with their customers is endless.

But Apple Inc. has been going through some criticism lately due to their decision to outsource the product to have cheaper wages. In Samuelson, P. A., & Nordhaus, W. D. (2010) outsourcing is defined as “locating services or production processes abroad” (p. 344). With the outsourcing component in Apple’s business plan, one would think that the company would lose business. On the contrary, the company performed even better. According to the New York Times by Duhigg, C., & Bradsher, K. ,“(l)ast year, it earned over $400,000 in profit per employee” and later on in the article says that Apple “employs forty-three thousand people in the United States and twenty thousand overseas…Many more people work for Apple’s contractors: an additional seven hundred thousand people…But almost none of them work in the United States (2012, January 21).” With the unemployment rate at 8.3 percent at the time, the United States saw a desperate need to create more jobs for citizens (BLS 2013). Jared Bernstein, a former economic advisor for the White House, is quoted saying that “Apple’s an example of why it’s so hard to create middle-class jobs in the U.S. now (Duhigg, C., & Bradsher, K. 2012).” Creating these jobs is just one way to decrease the unemployment rate. If Apple would bring more jobs over to the United States, the country would thrive more. But there are other ways to bring down the unemployment rate. However with this outsourcing, Apple is able to still bring to the table results. According to the New York Times article, “Apple, by comparison, has released five iPhones in four years, doubling the devices’ speed and memory while dropping the price that some consumers pay (Duhigg, C., & Bradsher, K. 2012).” So even though outsourcing has cost some middle-class citizens their jobs, the company was able to drop the prices of their product. But the issue about the jobs is crucial to American unemployment rate issues. But some people do stay positive. Economist at Harvard Lawrence Katz says “New middle-class jobs will eventually emerge (Duhigg, C., & Bradsher, K. 2012).”

No one is saying that Apple Inc. is responsible for the unemployment rate being so high, however a couple unanswered questions arise. Will outsourcing raise the United States’ unemployment rate? Will American middle-class be able to stay afloat if companies all over the country outsourced so their production costs would be cheaper? Will America be solely reliant on other countries to create our goods for business? These questions may not be answered for years and it may be too late when the U.S. realizes this. It may not. This will be something that will be left for the future economist to decide.

Works Cited

Bureau of Labor Statistics. (2013). Databases, Tables & Calculators by Subject. Bureau of Labor Statistics. Retrieved April 17, 2013, from http://data.bls.gov/timeseries/LNS14000000

Duhigg, C., & Bradsher, K. (2012, January 21). How the U.S. Lost Out on iPhone Work. The New York Times - Breaking News, World News & Multimedia. Retrieved April 17, 2013, from New York Times. (2012, January 21). Apple, America and a Squeezed Middle Class - NYTimes.com. The New York Times - Breaking News, World News & Multimedia. Retrieved April 17, 2013, from http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all

Samuelson, P. A., & Nordhaus, W. D. (2010). Economics (19th ed.). New York: McGraw-Hill.

What Is The True Reason for the decrease in Unemployment Rates

Seth Bradley

 

Reference: http://www.forbes.com/sites/kenrapoza/2013/03/08/unemployment-rate-down-as-americans-give-up-on-work/

The article that I read for this blog is called, "Unemployment Rate Goes Down as Americans Give Up on Work." This article talked about Americans and what are the reasons that the unemployment rate did decrease from January. The main answer is that people are tired of looking for work and they have decided to just up on searching for a job. An economist that viewed the results from the unemployment rates said they were so surprised at how many people had in fact given up looking for jobs. Also, the article discussed that women did not take the type of decrease in jobs as men did when the economy starting going down in 2008-09. The Bureau of Labor Statistics reported that the unemployment rate was down to 7.7 percent from 7.9 percent. This seems like it is a good sign, in fact some people are very excited to hear about the decrease in unemployment. However, this decrease in percentage has a lot to do with the fact that people have just stopped looking for jobs, and gave up on the economy. The employment to population ratio was still at 58.6 percent which is unchanged from last time. The employment numbers that came out on Friday were a shock to economists’, but they still show that our economic recovery is still not doing a very strong job so far, after taking place for four years already. The Bureau of Labor Statistics feel that people not having job opportunities is what is discouraging them, and making them stop looking for what they need.

When I think of the people that have given up on a job opportunity I think of the cyclical unemployment, which is the unemployment due to downturns in the business cycle. I feel that these people had good jobs and something happened that made them lose their jobs. That is something that those people cannot control, but there are a few policy measures that they can do to attempt to fix the problem. One thing that they could try is going to job programs and search around for jobs that are looking for the skill set they have to offer. If that is not an option then, instead of giving up, try to find a short term job that will give some type of cash intake and continue searching for a better job.

As long as the unemployment rate continues to decline it will seem that our economy is beginning to come back to what we hope for. However, if more and more people continue to give up then that will also affect the percentage a good amount as well. I feel that people, no matter how discouraged, need to try their hardest to keep looking for a job and do not give up.

Sean Walsh - "Real" Unemployment rate

Reference: http://jobs.aol.com/articles/2013/04/05/real-unemployment-rate/

This article discusses what the real unemployment rate would be if it took into account everyone who is actually unemployed.  Currently, the latest job report does not include the half a million people who dropped out of the labor force, those who cannot work because of disabilities, and those that are hardly working and would take a full time job if offered.

Officially, there are 11,742,000 unemployed Americans, a jobless rate of 7.6%. If you included the 803,000 discouraged workers, the 8 million involuntary part time workers, and the 8.9 million Americans who receive disability benefits, the total would be 18.5 million unemployed and a jobless rate of 11.7%; an increase of over 4% and almost 7 million individuals. Almost one in eight Americans who want to work is not because they cannot find employment.

 If an individual has not worked in the past four weeks but is actively seeking work, they are considered unemployed. The three main types of unemployment, frictional, structural, and cyclical, are lacking in describing all the different ways someone should be considered unemployed. Those who are considered unemployed are more than just those who are transitioning between jobs,  lack the skills needed for the available jobs, or there is not enough demand to provide jobs to those who want one.

If an individual has worked for pay in the last 4 weeks, they are considered employed. 0-30 hours is part time, 30 and above is full time. The issue I have is that there is a very wide range of weekly hours worked that categorizes and individual as part time. I do not believe an individual who works say 8 hours a week should be considered employed if they are like the engineer in the example who picked up any hours they could get their hands on at a grocery store.

When I personally think of individuals who are unemployed, I do take into account the individuals who have looked for so long that they have given up. I also don’t consider an individual who works between 30 and 35 hours a part time worker. I work 40 hours a week and can attest to the fact that regardless if there are 5 to 10 less hours of work, it is still a significant amount of time dedicated to work each week.

Clearly this is not an analysis to make suggestions that the components of the unemployment need to be changed, but rather that I agree with the article’s statement that the actual rate may be worse than the numbers indicate. I would like to think that there are only 7.6% of Americans who do not have a job. Unfortunately, that statistic of 7.6% only indicates the percentage of individuals who are actively searching for full time employment.

Aggregate Demand and Aggregate Supply

In this economic cartoon, it shows how income and prices are constantly going through expansionary and contraction phases in our economy. Business cycles are economy wide fluctuations in total national output, income, and employment, usually lasting for period of 2 to 10 years, marked by widespread expansion or contraction in most sectors of economy. They are caused by exogenous (outside sources) and endogenous (within). These can lead to economic indicators, like GDP, unemployment rate, and inflation. We get economic indicators by aggregate demand and aggregate supply.

Aggregate demand is the sum of these four groups of demands: households (consumption, C), firms (investment, I), government (G), and foreign trade (net exports, X). This looks like the equation:
AD = C+I+G+X
Aggregate supply describes how much output businesses would willingly produce and sell given prices, costs, and market conditions.

On a graph, the aggregate demand curve is always downward-sloping and the aggregate supply curve is always upward-sloping. The AD curve shows what everyone in economy would buy at different price levels (monetary policy, fiscal policy, and other forces). The AS curve shows quality of goods and services that businesses are willing to produce and sell at each price level (price level and costs, potential output, and capital, labor, technology).

For the first economic indicator, GDP, it is measure of market value of all final goods and services produced in country during year. It's goal is to tell us what is going on with output. (Is there a growth or contraction?) If there is high GDP, then we have a strong economy; if there is low GDP, then we have a weak economy.

For the second economic indicator, unemployment rate, GDP increases when unemployment rate decreases; GDP decreases when unemployment rate increases. The unemployment rate is determined by the number of unemployed divided by total labor force.

For the final economic indicator, inflation, it is percentage change in overall level of prices from one year to next. There are two causes for it: increase in aggregate demand (demand pull inflation) and decrease in aggregate supply (cost push inflation).

Business-cycle fluctuations in output, employment, and prices are often caused by shifts in aggregate demand. When these shifts in AD decrease rapidly, these lead to recessions; when they increase rapidly, these lead to inflation. We will always go through this constant cycle of peaks and troughs within out economy - that's the way it works.

"Income Price & Determination." Cartoon. AP Government & AP Macroeconomics. N.p., n.d. Web. 14 Apr. 2013. http://www.teresaherrin.com/iii-income-price-determinat/.
Samuelson, Paul A., and William D. Nordhaus. Economics. New York: McGraw-Hill, 1985. Print.

Retail Sales Falling

               I read the article “Retail Sales Fall for Second Time in Three Months.”  Economists believe that sales figures are declining recently for one of two reasons, possibly a combination of the two: either the payroll tax and income tax hikes earlier in the year have taken a harder toll on people than was believed, or the colder weather of this past February and March have made the sales numbers strange.  I find it hard to believe that the tax hikes had nothing to do with these low numbers.  In class we discussed two things the government could do to help the economy.  Doesn’t our economy need help right now? Yes.  So, they could either raise government expenditures or lower taxes.  The article says that the government has done neither of these things.  Not only did they raise taxes, but the government has cut spending in many areas.  With consumer spending down, the largest element in calculating GDP, I’m curious as to what effect has been made on RGDP.  

                Knowing that consumer spending has decreased recently, it shouldn’t be a surprise to find out that, as the article says, consumer sentiment (that being satisfaction) has also gone down.  Happy people shop.  Unhappy people don’t shop.  People who have higher taxes, on taxes that are already pretty high, also don’t shop.  I’m not sure how the government thought they were stimulating the poor economy by doing the exact opposite of what we have discussed in class regarding fiscal policy.  In the article, Cary Leahey, an economist who works at Decision Economics said, “The worry is the full reaction to the expiration of the payroll tax cut and to the sequester budget cuts won't be evident until sometime this quarter.”  

                Let’s talk about the decline in consumer spending.  We know that it’s because of tax hikes and because the government is caught in the middle between lowering the deficit and stimulating the economy.  But what else is affected by less consumer spending?  Well, stores aren’t making money.  If there isn’t a demand for new clothes, beach accessories, and iced mochalattecinos, then stores won’t supply it- or they supply it at a lower price.  The picture in the article is of a store front with a sign saying, “SALE, fresh markdowns, right now- WOW!” That’s right: sales.  Sometimes we see sales on out of season clothing and accessories and it makes sense.  That’s not what the current sales are.  Currently, the sales are probably because of the low consumer spending and no one is going to buy $100 sunglasses or sandals.  Even the wealthy got higher income taxes earlier this year.  

                People were hurt by the tax raises at the beginning of the year and we are now seeing the effects of those raises.  As Cary Leahey said, the concern now is that this is just the beginning.  The sad part is that we learned about what the government can do to boost the economy, and they did the opposite.  Lower consumer spending is the result which, being the biggest factor of GDP, does not boost the economy.  Unfortunate.

http://www.thefiscaltimes.com/Articles/2013/04/12/Retail-Sales-Fall-for-Second-Time-in-Three-Months.aspx#page1

 

Supply vs. Demand

The cartoon, located to the left of the text, is a great representation of what happens with supply and demand in the economy.  The two arms that are wrestling represent the supply and demand of an economy.  The little man at the top, who is holding up a leveler above the two arms, or supply and demand, is showing that at that point they are equal.  This point, where supply and demand is equal, is also called the equilibrium point.  In economies this is what happens.  The suppliers try to keep up with the demand from the demanders.  The demanders determine how much or how little needs to be supplied.  Then at some point, both the supply and demand will equal each other.
Supply and demand was one of the first things taught in Macroeconomics.  Demand always has a negative relationship with price because of the Law of Demand.  The demand line is a negative line.  Demanders are households / consumers.  A few things determine the demand side:
     1.  Income
              •  How much money I have / make, determines how much I buy.
Products:
   a) Nominal Good- demand rises as income rises
           Examples= health care, quality of clothes, cars, and electronics
   b) Inferior Good- income rises demand falls
           Examples= Ramen noodles, McDonalds, and Spam
     2.  Tastes / preferences
     3.  Population / market size
     4.  Prices of related goods
               •  What’s the relationship?
                          a)  Substitution= goods that serve the same purpose
                                         Example= Coke and Pepsi
When the price of Pepsi increases the quantity demanded of Pepsi decrease (Law of Demand), which results in an increase in demand for Coke.
                          b)  Compliments= goods that go together.
                                        Example= Peanut butter and Jelly
When the price of peanut butter increases the quantity demanded of peanut butter will decrease, meaning that the demand for jelly will also decrease.

The supply is a positive line and has a positive relationship with the price because of the Law of Supply.  Suppliers are firms / businesses.  A few things determine the supply side, which are:
     1.  Input Prices
                 •  Example= labor
                            Price of labor= wages
When wages increase, supply will decrease because a firm cannot produce as much if they have to pay their employees more.
     2.  Technology
               •  When technology increases, supply will increase as well.
     3.  Government Policy

Equilibrium is the point where the supply line and the demand line are touching.  At this point both the supply and demand are equal to one another.  There is no surplus or shortage at the equilibrium point.

By: Elli Fields

McMillan, Brad. "'Supply' and 'Demand' Arm Wrestle Keeping the 'Industrial Real Estate Market'        Steady." Cartoon. CartoonStock. N.p., n.d. Web. 11 Apr. 2013. <http://www.cartoonstock.com/cartoonview.asp?start=&search=main&catref=bmm0122&MA_Artist=Not+Selected&MA_Category=Not+Selected&ANDkeyword=supply+and+demand&ORkeyword=&TITLEkeyword=&NEGATIVEkeyword=>.

Roanoke College Economics: "What can I do with a degree in economics?" speake...

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