Human Capital vs Foreign Human Capital (UNEMPLOYMENT)

I am sorry if my post gets a little complicated or boring because I thought of writing this in my 30 minutes of blog's brainstorming. As an economist, especially in the field of economic development, I have tremendous amounts of issues and ideas to say. Today, I am going to touch on the human capital side. Human capital is basically employees or work force. In some countries, one can find human capital to be a little expensive or efficient than the others'

In developing countries, the cost of human capital is relatively cheap, especially in the manufacturing industries. Moreover, technology is scarce and human capital remains relative abundant. More importantly, population is higher and education is lower.


In other cases, one can find an influx of foreign workers, working in rich countries. Local workers, in rich countries, with better education or priorities would not pick up hard labor works due to personal reasons. Importantly, most rich countries have high technology capital to increase their production with less human involvement. However, of course we do see countries that require foreign workers for certain manufacturing or hard labor business such as constructions. As a result, foreign workers are needed from overseas to support local rich and labor-intensive required companies. Their pays for such workers are much more higher and better than other developing countries'.

For instance, one would live in Johor Bahru (the tip of western Malaysian peninsular) and work in Singapore. Why? Currency advantage, better pay and more opportunities.

Well! If you look at it with a different angle, there can be a disadvantage. Seriously, I don't want to talk about social impact like leaving your family and friends behind while you work abroad. I want to focus on economic terms. Yeah! Forget about living standards too. I think everyone knows about it. We all know Johor(e) is one of worst cities in Malaysia.

The advantage might be better off for some particular people but not necessarily to others. With better wages in a developed country, workers are expect to work harder, given with the competitive outcome. High wages attract more cheap labors from abroad. Noone would deny to work in those companies with given high pays. On the other hand, companies in developing countries might offer lower wage, which also means that they can hire more workers. In other words, we can see two different competitive environments. First one, one must work for harder. Second, abundant labor is around. In developing countries, abundant labor is always around whereas in developed countries, labor is not that a lot but companies can always hire cheap labors from abroad with their attractive high wages. So what is the disadvantage? Foreign workers in developing countries will face higher risks of losing more jobs when there is a downturn in economics.

Governments usually play the priority to protect their own citizen, especially in providing jobs. Again, most multinational companies are more likely to cut employment in developed countries due to high cost of running the business in developed countries. Well! during crisis like recession, companies will lay off workers. However, the chances of getting laid off is higher in developed countries, especially to those foreign workers from abroad. For example, it takes $1000 to hire 4 workers in China but it takes $1000 to hire 1 worker in Singapore. Assume the worker's efficiency is different, the 4 workers in China can produce 2 products and 1 worker in Singapore can produce 1 product. If the company needs to cut down cost of $500, it will go for a retrenchment in its company in Singapore so that the output is now 2.5 products. If the company were to cut in China, the output would be 2.0 products. Therefore, the risks are there.

All in all, this just my random thought about the human capital in developing countries and developed countries. I am sure there are more things to talk about but again I am tired now. You can definitely ask me questions about it. It's just a discussion. Expect more of these issues to come. Now banking & insurance industries cut things based on sales. It seems everything shrinks. More to cuts in commercial flights too.

Companies Jobs Gone
Rolls-Royce 2,000 Jobs
AIG unknown
CityBank 52,000 Jobs
HSBC 500 Jobs
DBS 900 Jobs
RBS 3,000 Jobs
Deutsche 900 Jobs
Boeing 800 Jobs
NOL 1,000 Jobs
Suzuki 1,400 Jobs
Toyota* 12o Jobs for now
Pepsi 750 in America (plant)
BT 10,000
Fidelity 1,300
Lehman brothers' jobs are all gone