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The Effects of Economic Globalization in the United States

Positive Effects

Increased market

Globalization has also been at the center stage in creating increased markets for the goods, services and works manufactured and produced in US. The largest markets have been the developing countries that have no skills for such goods or that have had no raw materials for such goods. Perfect examples are companies like Coca Cola and Procter and Gamble that have found deep markets in foreign countries. The foreign countries have provided good markets for their products. The income generated is diverted to the Americans shareholders. This is a benefit attached to globalization in US market.

US companies also gain new locations and low-cost raw materials in the foreign markets. These foreign countries always offer these locations for less cost than in US. The foreign markets also offer cheap labor compared to US labor. A good example is the various assembly US companies located in Malaysia.

Increased income

Globalization has been the major contributor on the increased exchange in the US. Goods and services that are readily available in US can be exported at higher prices while those that are not available there can be imported at lower prices. This ultimately creates an increase in the income.

Movement of technology

Globalization has facilitated movement of technology from and in US. Asia has been a good provider of technology advancement to US based companies. The movement of technology facilitates increased innovation and the overall production in US.

Diversification

Globalization has also facilitated firms in diversification. US firms that operate in different parts of foreign states gain opportunities to diversify more broadly. Such countries will find recessions and booms in such countries advantageous to them. The different behaviors in different markets of the firms will be beneficial to such firms in terms of stability of their profits. Such firms therefore gain the ability to make use of the world financial markets. Foreign markets therefore provide a safety valve from the overheating US economy.

Provision of Employment

Due to globalization, many foreign companies have found US convenient depending on the nature of the businesses that they undertake. Such companies have set up their offices and their plants in US. In the course, such companies have been successful employers for both the skilled and semi-skilled Americans.

Negative effects

Job Losses

One of the negative effects that globalization has brought in US is loss of jobs. This can economically be said to be offshoring. When jobs are transferred from US to different parts of the world for the setting up of a company that should have been located in US, then there is always eminent loss of jobs for the US residents. The transfer of the jobs can be facilitated by various aspects. The first reason is the availability of raw materials away from US. If a company deals in leather industry, and the availability of skins is in a different location, then the company will tend to transfer its location to the place where skins are available. This is often so because the company wants to save on the transportation cost. Other factors that may lead to offshoring is availability of markets and skilled labour among other factors. This has been said to contribute to unemployment which stood at 4.5 % in 2006.

Effect on Wages

Globalization has also contributed to the movement of labor in and out of US. Such movement has contributed majorly in the change or shift of wages of both skilled and unskilled employees. Various companies in the US have tapped skilled laborers from foreign countries. This category of employees is skilled in experience, education or in terms of job classification. This has contributed majorly to the rise in inequality of wages between skilled and unskilled workers in the US. This phenomenon has now attracted attention and different surveys have been conducted. Studies have shown that the difference between wage of a less-skilled American and a skilled employee is 20%, on average.

Exposure to Foreign Economic Shock

Globalization has exposed the US economy to foreign shock. This can be seen and felt when foreign markets experience economic meltdown which have been the recent cases. When this happens, it is the US market and economy that are affected more. US offers great financial loans to the developing countries. When such countries experience economic shock, then the same is transferred to US market. This also happens when the export and the import are smaller than the GDP. The current Asian economy situation is a good example in terms of effects on the American market.