Economists have identified three types of unemployment, which include frictional, structural and cyclical unemployment. Frictional unemployment occurs when workers leave their job in search of suitable jobs and the companies start looking for suitable workers. Economists are not worried about frictional unemployment because the searches by firms and workers to find more suitable matchups is beneficial for the economy (Sexton 265). This is so because frictional unemployment tends to be greater in times of low unemployment, when job opportunities are abundant in the labor market. This high level of job opportunity initiates mobility, which in turn creates frictional unemployment. On the other hand, structural unemployment occurs when workers with no or insufficient skills do not obtain a long term employment. In this case, there is a mismatch between workers and jobs in the labor market. Similarly, this happens when low skilled workers are frequently unable to find desirable long term employment. Structural unemployment takes a long time than fictional because these workers do not have marketable skills. The cyclical unemployment occurs due to business cycles in the economy (Sexton 265).
Therefore, structural unemployment will affect PepsiCo company because it reflects the dynamic dimension of the changing economy that in turn affect the labor mobility in the firm. For instance, the customer’s change in taste could affect the demand for the PepsiCo’s products. This is so because the company deals with the production of food and beverage that are widely affected by the customer’s change of taste. Market controversies could hamper consumer confidence, and start exploring other products from competitors such as coca-cola. The consuming public may decide to increase the demand for Coca Cola products and decrease the demand for PepsiCo. This could affect the productivity of the company making them lay off some workers due to decrease of demand of its products.
Similarly, this shift in demand would cause the workers who lose jobs in PepsiCo to become structurally unemployed. To regain employment, these unemployed workers must retrain and find job openings in other industries. Therefore, the workers could lose their jobs because of a permanent reduction in demand for goods and require retraining to find other employment.
Meanwhile, the implementation of the advanced technology, new product completion may increase the structural unemployment in the PepsiCo. The disparity of worker’s skills of out of work and skills required for existing job opportunity could affect PepsiCo Company. Workers may face joblessness because they lack related skills to perform available job in PepsiCo.
Economists argue that outsourcing cause unemployment following job displacement. However, the rate of unemployment is unaltered in the long run, although some workers may face wage reduction. Outsourcing enhances the wage distribution between the high and low skilled workers. Outsourcing helps to decrease economy wide equilibrium unemployment under the practical condition where the percentage of highly skilled workers is satisfactorily low. Economists consider a certain level of structural unemployment inevitable because of the numerous sources of mismatching between skills and jobs. Therefore, the outsourcing workers to fill existing job openings will decrease the structural unemployment in the PepsiCo Company.
Outsourcing has become a threat to living standards, the employment opportunities for Americans trained in technology, and other fields now open to lower salaried overseas workers (Sparrow 27). Therefore, if a U.S. firm hires foreign workers abroad, these wages could not count in the U.S. GDP. This is so because gross domestic products (GDP) measure location, which means what is counted is what is produced and earned in the domestic economy. The reality is that when foreign workers and other resources such as firms are employed outside the country there wage is excluded from the GDP, but included in the GNP. Although all these foreign employees of American firms produce valuable outputs, which is a wage, none of it counts in the GDPs of the United States. This is so because it counts in the GDP’s of the other countries. For instance, the wage obtained from the Indian citizen working in a call center for Microsoft will be included in the GDP of India and not in the GDP of the United States. The work done outside the home contributes to the nation’s best image but is not counted in GDP because it does not affect the price.
Growth is the main long-term economic policy objective of the PepsiCo Company. Thus, the outsourcing of workers could increase profits and decrease of production of the PepsiCo Company because it will help in reduction of costs. By spreading training costs over a larger staff and employing highly skilled employees will help PepsiCo Company to increase its earning and reduce the cost of production. The outsourcing of the skilled employees will help to reduce the mismatch between the employees and the job, which will help to decrease the structural unemployment in the PepsiCo. The outsourcing will help the company to employ advanced technology that will need more workers to operate hence reducing the unemployment rate in PepsiCo.
Sexton, Robert L. Exploring Macroeconomics. Mason, Ohio: South-Western Cengage Learning, 2011. Print.
Sparrow, Elizabeth. Successful It Outsourcing: From Choosing a Provider to Managing the Project. London [u.a.: Springer, 2003. Print.