Long-Run Vs. Short-Run: Labor In Action

Long-Run vs. Short-Run:

Labor in Action

The whole concept of moving to a company to a neighboring country is very common. The concept of importation and exportation came with the increasing development of colonization. Importation is defined as, "To buy or bring in products from another country." The definition of Exportation is as follows, "To send goods to another country to sell (The American Heritage Dictionary)."The automotive market today follows a similar trend today. It has been noted that many countries are using, buying and importing foreign cars for many reasons, but many do not understand that these cars are built and directly sold in their country. The only difference that is seen here is that there are two different types of firms. There is a short-run and a long-run. A short-run company has a specific period of time where the product of at least one input is fixed and the rest of the factors can be varied (The American Heritage Dictionary). The long-run company is where all the quantities of all the factors of production used in the production process can be changed (The American Heritage Dictionary). In a case given by Professor Michael Porter of Harvard University, the Japanese company that decides to move into foreign land under the act of eliminating man power and replacing it with machine- like labor can be considered a long-run firm. The opposing company is the American automotive company model that decides to move into a foreign market and use the cheap labor to make their product, can be considered a short-run. When taking a company, either short- run or long- run, one must consider that certain attributes are accountable for the company's effect on the economy such as the motivation of the firm or outsourcing.

Professor Porter reports, "Faced with high labor costs American consumer electronics firms moved to locate labor-intensive activities in Asian countries, leaving the product and production processes essentially the same." This meaning that the certain American companies that decided to move into foreign markets were mainly motivated out of cheap labor costs. To a certain extent the statement is viable, the idea that ones product will be cheaper to sell in other parts of the world is a beneficial attribute. Implicating that one company can move more of their products at a low cost and thus more profit earned. In the United States the federal minimum wage is set at $5.15, and each state follows its own legislation to raise it and never to go below it. For example, Nike Inc. had they stayed within the United States and produced their product at these wages, it would have been too expensive for the buyer to purchase Nike products. Generally, in China the average person earns by the new wage laws $67.33 dollars in a month (Minimum Wage System Set Up), as opposed to an American worker who earns the federal wage standard of $5.15 per hour; they earn approximately $906.04 in a month (www.dol.gov/esa/).

As stated by Professor Porter, the American model company feels it unnecessary to change production procedures by adequate use of modern innovations because cheap human labor is available in foreign countries. Therefore, no such changes are applicable when it is much simpler and cheaper to hire more unskilled laborers. Thus, the American model presents itself as a short- run company. When referring back the definition of short-run it states: one input is to be fixed and the rest can be varied. In turn, this means that the human laborer is fixed, and that all other necessities of the company's development can be changed as progressively; example given, adding new benefits, establishing unions, and improving machinery.

Professor Porter further states that, "Japanese rivals set out instead to eliminate labor through automation. Doing so involved reducing the number of components, which further lowered cost and improvement quantity." The main feature of the Japanese company model that Professor Porter stresses is that they are moving away from human labor to machine labor. The greater movement towards machine labor has allowed for the Japanese company to ultimately be more successful. Also the Japanese companies are very well known for being strong as a collective team that always wins together or else, as one author has written that:

"Japan is like an oyster. An oyster dislikes foreign objects: When even the smallest grain of sand or broken shell finds its way inside the oyster shell, the oyster finds the invasion intolerable, so it secrets layer after layer of nacre upon the surface of the offending particle, eventually creating a beautiful pearl (Strach et al).

Progression can only occur when something new comes into the spectrum of the sphere, meaning that if human labor is becoming too expensive and too hard to maintain, because of unions and employee demands, a company likely will look for alternatives. In this case the owners of the car companies were looking on how to improve their technology. This meaning that once the company improves in the field of technology they will at the same time invest in it, and then liquidate some portion of the workers that are no longer needed, only leaving skilled labor with the capability to operate new machinery in order to improve on the rapidity of production. Thus, the Japanese model is considered a long- run company. Redefining the term long-run, all contributing factors can be changed in process of a firm's evolution.

Outsourcing is another common occurrence. As defined by The American Heritage Dictionary outsourcing is, "The procuring of services or products, such as the parts used in manufacturing a motor vehicle, from an outside supplier or manufacturer in order to cut costs (The American Heritage Dictionary)". In the example of the American company, they as the citizens have the right to create happiness for themselves through prosperity and expansion. Meaning that if they see fit that they move to a country where it is cheaper to produce a product than they have the economic right to do so, and in the long run the product that will be made in a foreign country will be cheaper to sell in America. Another related author has asserted:

"The moral justification for outsourcing is individual right. It is the right, and indeed the moral obligation, of an American businessman to run his company in the most profitable way possible. If that includes outsourcing, so