Globalization, Labour Markets, And Outsourcing Of Call Centre Jobs In India: An Economic Perspective | Inflation In The UK: Concerns And Policies | Market Structures In UK Businesses

Globalization and Labour Market Dynamics

The commercial sector in the global framework, over the years, has undergone immense dynamics and modifications and has also become more inclusive as well as integrated. The global phenomenon like Globalization and others have contributed significantly to the integration of the business sectors and the labour markets across the world (Beck 2015). In this context, globalization can be defined as primarily of economic process of integration, which in turn has led to a more free and easy flow of goods and services as well as factors of production across different corners of the world. This involves immense dynamics in the global production dynamics and labour market scenarios. The report takes into these economic concepts of Globalization and labour market dynamics and tries to explain the contemporary common phenomenon of outsourcing of call centres jobs in countries like India (Fujita and Thisse 2013).

The labour market, by the meaning of the phrase, refers to the demand and supply dynamics of labour resources in different countries. The demand side of labour markets primarily consists of the employers, whose primary concern remains of hiring the best labour resources in the cheapest of prices, in order to maximize their profit and revenue generation (Potrafke 2013). On the other hand, the supply side of the labour market in the country consists of the people who are eligible to work, who mainly competes with one another with the objective of getting the job, which can maximize their monetary as well as overall welfare. Thus, the labour market can be defined as the forum of interactions of the demand and supply side players of labour, who have their own interests and objectives (Milberg and Winkler 2013).

In the recent few decades, the labour markets across the world have become more integrated, much of which can be attributed to the worldwide economic and social phenomenon like Globalization, which have made trading and exchange of commodities as well as services more easy across the countries (Basu 2016). This in turn, has led to the efficient usage and implementation of the comparative advantages, which the different trading countries enjoy in different industries, which are elaborated in the following sections.

The theory of comparative advantage, first put forward by David Ricardo, emphasizes on the fact that the countries should concentrate more on the production of those commodities and services in which they have least opportunity cost and then trade the same for those in the production of which they have high opportunity cost or comparative disadvantages (Laursen 2015).

Outsourcing of Call Centre Jobs in India

This theory of comparative advantage, in turn indicates towards the aspect of utilization of those resources more widely, which are abundantly available in the country itself. In other words, according to the theory of comparative advantage in production and trade, the countries in which labour, as a factor of production is present in abundance, should concentrate on those industries which uses labour more intensively. On the other hand, those countries in which capital is more abundant than that of labour, should produce more of those commodities and services, for the production of which, capital is required more intensively (Cuñat and Melitz 2012).

In the context of the above discussion, the practices of firms of several regions, especially those in the developed countries, of outsourcing their call centres to countries like India, can be explained. India, one of the newly emerging global economic giants in the international scenario, is characterized by the presence of huge amount of cheap labour that are trained in basic skills and English language. This in turn makes it beneficial for these companies to outsource their call centre jobs to India as this reduces their costs immensely as compared to the same in the developed countries themselves, due to the presence of low wages and the currency-exchange value advantages (Insan and Mehndiratta).

Conclusion

From the above discussion, it can be asserted that in the current environment of Globalization and more integrated labour market, due to the presence of comparative advantage, the outsourcing of call centres to India proves to be beneficial for most of the firms, due to increased cost effectiveness.

In the contemporary global economic scenarios, there are several issues of concern among the governing authorities of the countries, which have immense implications (positive as well as negative) on the overall economy of the concerned countries and the welfare of the residents of the concerned countries. One of such economic issues of immense concern is that of inflation. The inflation is usually measured with the help of the Consumer Price Index of a country, which shows broadly, the price, cost of living and overall welfare prevailing in an economy (Sargent 2013). The report considers this to shed light on the concern of the government of the United Kingdom, regarding the rapid rise in the CPI in the current periods. Along with this, it also tries to discuss the policies taken by the same to address the situations, with support from the empirical evidences.

Inflation in the UK

Inflation, in terms of economics, can be defined as the phenomenon of continuous rise in the overall level of prices in the economy of a country with time. This is of immense concern for the governing authorities of any country as a continuous increase in the prices of the goods and services in the country, in general, leads to a decrease in the overall welfare of the residents of the country. This is because hiked prices directly lead to sufferings of the residents of the country as a whole (Faust and Wright 2013).

In this context, the problem experienced by the economy of the United Kingdom can be taken into account, which can be seen in the continuous increase in the Consumer Price Index of the country, which, according to the evidences of Office for National Statistics, has increased from 1.8% in January to 2.3% in February (2017). The CPI, measures the price level changes of the commodity bundle concerned, which are usually purchased by the households of country. Thus, the increase in the CPI of any country reflects the increase in the level of prices of the general goods and services available for the households in the country, which in turn indicates that there exists higher than expected inflation in the country.

Figure 1: Rate of Inflation in UK (2017)

(Source: Tradingeconomics.com, 2017)

As can be seen from the above figure, the inflation in the country has gone up significantly in after January (2017), with the rates increasing more or less consistently with time. This is directly related to the increase in the CPI of the country in the concerned period.

Inflation being one of the current bothering issues in the country, the Government of UK, in the present scenarios, have a combined framework of monetary as well as fiscal policies to combat the situations. One of the primary policies to effectively reduce inflation in the economy is reduction of the money in hands of the people of the economy, which can be done by increasing the interest rate in the economy. This is because with the increase in the rate of interest, the willingness to save of the people increases, which in turn decreases inflation in the economy (Weale et al. 2015).

Figure 2: Rate of interest in the United Kingdom

(Source: Tradingeconomics.com, 2017)

As can be seen in the above figure, the rate of interest, which was decreased significantly in the mid-2016 and early-2017, was increased in the late quarters of 2017, from 0.25 to 0.5, which can be one of the potential strategies on part of the government to decrease inflation in the country.

Government Policies to Combat Inflation

Another effective policy, which can be undertaken in this aspect, is the fiscal policy of government to reduce the government spending as this decreases the money in circulation, thereby decreasing the inflation in the economy.

Figure 3: Changes in Government Spending in UK (2012-2017)

(Source: Tradingeconomics.com, 2017)

As can be seen from the above figure, the country has reduced their public spending significantly in the recent periods, which may be for the purpose of tackling inflation in the economy.

Conclusion

The above discussion shows that the inflation being one of the primary issues of concern in the economy of UK, which can be seen in their rising CPI, in the recent years, the country has been taking several monetary as well as fiscal policies to control the situations.

In economics, the term “market” refers to the forum of interaction between the buyers and the sellers of different goods and services, where these two sides mutually interact with each other to reach a point of mutual agreement. There are different types of market structures present in the economy, which differ in terms of the number of buyers and sellers in the market, the nature of goods or services sold in the market, the ease of entry or exit of new and existing players and other factors. In this context, the report tries to take into account the market structures, which prevail in reality, in the businesses including the supermarkets, train services as well as restaurants, taking into consideration the economy of the United Kingdom (Dunne et al. 2013).

Supermarkets: Sainsbury

The supermarket industry in the United Kingdom shows the presence of oligopolistic market structure, with a few dominant supply side players; with each of these players enjoy a considerable extent of market power and share of clientele. In the United Kingdom, the supermarket industry is mainly dominated by four major players, which include Tesco, Sainsbury, Asda and Morrison. Collectively these four big players capture nearly 75% of the total market share in this industry of the concerned country. There are also several other small players in the industry, however, they do not enjoy any considerable market power or share of customers.

There is very limited scope of any small or medium supply side players in the supermarket industry, which is one of the primary characteristics of any oligopolistic market. Another aspect prevailing in the supermarket industry of the country is the presence of collusion among the big four super markets in the country, which in turn leads to the creation of barriers against any kind of new competitors in the industry. There exists non-price competition in the industry among these players and each of these supermarkets, including Sainsbury experiences economies of scale, which are indicates towards the oligopolistic structure of the industry in the country (Fudenberg and Tirole 2013).

Market Structures in UK Businesses

The underground system of train services, the London Underground Train Services, also known as the Tube services in the country, works in the monopolistic framework. The monopoly, as a market structure, consists of a single buyer and many buyers, which in turn gives the whole market power to the seller itself. The other features of the monopoly market include the absence of free exit and entry in the market, as there are no other player in the supply side in the market (Bresnahan and Levin 2012).

In this context, the situation of operation of London Underground Train Service can be taken into consideration. The London Underground Train Service is the sole provider of underground train or tube services in the zone of its operation. The service is of public in nature, with the supply of the services being restricted to this enterprise only. The London Underground, being the sole service provider, in this industry, enjoys the entire market power and also has the price making capability in this industry. These are the primary characteristic of a monopoly market. As can be seen from the concerned train services, the consumers do not have any price deciding power and has to be content with the price and the amount of supply of services as decided to be provided by the enterprise. 

Restaurants in UK, which also includes McDonalds (Being taken as the concerned case study) operates in a monopolistically competitive environment. This implies that there are a large number of buyers and sellers in this industry. However, there exists product differentiation in the industry as McDonalds, like any other food chain operating in this market, tries to differentiate their product on the basis of quality, taste and other attribute. Due to the presence of product differentiation in the industry, each of the restaurants (including McDonalds also) enjoys a considerable amount of market power. However, there are no barriers as such for free entry and exit of participating agents (both buyers and sellers) from the market (Zhelobodko et al. 2012).

Conclusion

Thus, from the above discussion, it is evident, each of the above mentioned sectors and one of their constituting enterprises operate in a different type of market structure, which are characterized and differentiated on the basis of the nature of the products, number of buyers and sellers, entry and exit structure in the market and other attributes.

A:

For evaluating the feasibility of the two projects, the Net Present Value (NPV) method has been taken into consideration. This is the most superior measure of investment appraisal, since it takes into account the time value of money and it assumes that the current dollar value is worth more in contrast to the future value. The positive and higher the NPV of a potential project or investment, the more profitable the same is for the organisation or the investor. In this case, the NPV value for project A is obtained $23,117.04, while the same for project B is obtained as $19,793.16. Hence, it is advisable to choose project A, since it would provide greater returns on investment.

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Tradingeconomics.com (2017). United Kingdom Inflation Rate | 1989-2017 | Data | Chart | Calendar. [online] Tradingeconomics.com. Available at: https://tradingeconomics.com/united-kingdom/inflation-cpi [Accessed 24 Nov. 2017].

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