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  • Essay / Labor Market Employment - 1242

    Article ReviewThe article by Wright and Bastos (2012) focuses on the impact of exchange rates and wages on unionized labor markets. Globalization has prompted several companies and organizations to focus on competition, with the aim of improving sales volume. Such international competition is also found in the labor market sector, as companies are determined to ensure that they have a rich talent pool, which will contribute to the achievement of the organization's goals and objectives. Thus, global business competition has led to the development of greater worker sensitivity to wages. Wright and Bastos (2012) also argue that exchange rate fluctuations have considerable effects on wage formation. As such, the magnitude of wage adjustment, achieved after the appreciation of a country's currency, depends on existing labor market conditions. When the local labor market is extremely depressed, wage rates are lowered in order to protect employment levels. This ensures that workers are placed within their reserved income level, implying that the chances of further wage adjustments due to currency appreciation are significantly reduced. Collective bargaining is a strategy often adopted by companies to set minimum standards, wages and working conditions. Thus, the local level has the capacity to make salary adjustments, which reflect the conditions of businesses and workers (Vachon and Wallace, 2013). These adjustments are based on the need to reduce labor costs borne by companies. For example, when companies fail to adjust their wages, this means that their labor costs increase significantly. This happens because market conditions are not favorable for driving...... middle of paper ......fluctuations in the economy. The disadvantages of labor cost and rates are when companies are not interested in the market environment. , they could find themselves on the verge of collapse due to the losses incurred. This happens since businesses will not have the opportunity to understand what is happening in the environment and the strategy that needs to be adopted to overcome environmental challenges (Vachon and Wallace, 2013). Work rates also have a negative effect on employees when the adjustment is geared towards reducing their income. This leads to a large number of employees resigning or leaving their jobs to seek better-paying employment. Therefore, the level of unemployment in a country increases significantly. As such, companies must incur additional resource costs to hire and train a new labor pool, which must realize the goals of the resigning employees..