For Economics Majors
 

And anyone else who fancies themselves in the world of economics?

I would like answers in laymans terms to the following questions

1) Is the answer to economic growth immigration? Don't they just create more competition in the labour market or is their always a shortage of skilled labour? There doesn't seem to be a shortage when I am looking for marketing jobs. What are some of the issues here. Please no answers on the impact of immigration on the social and demographic composition of your country - just want the economic impact.

2) If I start up a company today selling a product that already exists in New Zealand. Will NZ's GDP grow or will I just be taking sales away from my competition or other substitute products (wouldn't the consumers money just be spent on something else if I wasn't around?) Is this question clear? I am asking asking whether a new business creates net growth for a country.

3) Lastly the last company I worked for in Canada wanted to outsource its call centre to the Phillipines or at least some of its calls. Does outsourcing just result in a loss of jobs in the country or because the company can then lower its prices to customers does the cost of living go down and this makes up for it? Personally I am not sure about this as I think most companies who outsource just keep the profits for its investors.

the answer is buy low and sell high

I think you made a typo in the first question. It is not clear

2) You won't know until the end of the year (when they estimate the GDP growth) whether your product resulted in GDP growth or not because either of the scenarios that you mentioned could happen. Other scenarios might happen too since the NZ economy is open and by your entry into the market the other businesses might look for opportunities in other areas.

3) Obviously call center outsourcing will result in jobs losses in Canada. Even if the cost does go down to the individual customers and the shareholders will see increased profits the pain of the unemployed will be there to contend with. And will the increase in disposable income (rather than standard of living) really be enough to make any significant difference to the average consumer? Not sure about that.

According to my own understanding:

Very generally speaking immigration aids economic growth, but it depends who exactly you're bringing in. Marketing jobs are almost always created by workers more 'skilled' than those who take them. So difficulty finding one definitely isn't indicative of an abundance of skilled labourers.

If your new business succeeds it will probably increase GDP by virtue of having done something better than the businesses before it. Better businesses tend to add more value. But GDP isn't a very good measure of anything on a micro level.

In a competitive market, companies that outsource use the profits to undercut their rivals. Or at least, it's very much in their interests to. If they're all in a cartel then obviously they'll agree not to. They also won't bother if customers are indifferent to price i.e. if they'll keep buying coca cola even though pepsi is 5p cheaper.

nz got rid of pence about 50 years ago iirc

There are competitive markets out there. But when it is an oligopoly or just 5 to 6 players competing along with 80 to 90 small timers - it isn't purely competitive in practice. Company CEOs talk to their rivals. And there is an implicit and often explicit agreement not to start price wars - therefore I would think that while prices may go down I reckon in a lot of cases shareholders will just see bigger dividends or the money will be reinvested into R&D or new projects.

Good answers lads.

Yeah, it's tough to maintain competitive conditions when it comes to the biggest companies. But it seems unethical to me to pay rich people lots to do what poor people would be willing to do for little. So outsourcing ftw nevertheless.

In answer to question 1: Skilled immigration is the most ideal remedy to stimulate economic growth, if you're going down the path of immigration that is. Immigration b00sts demand for items such as houses, thus house prices will go up. However if you have unskilled, relatively poor immigrants, then it is unlikely they will be in a position to afford to buy big ticket items such as houses until a long way down the line, so the effects won't be seen for a long time (if at all).

Smali did a reasonable job of answering question 2.

Question 3: It's very important to note that organisations don't only outsource to gain a price related competitive edge. Many times companies will outsource departments such as IT and finance in an attempt to be able to focus more heavily on their primary function. This added focus results in a quality oriented competitive edge. It's simplistic to say that the only reason to outsource is to cut costs.

My big chance to actually be useful for once on this forum and Murphy takes it away from me. WAC.

I'm sure a second chance will present itself some time in the next nine years.

Let's not get carried away here.

Governments should be tasked with maximising their own economies - economies of other countries and the welfare of their citizens while a consideration should be secondary.

For my own two cents - It is all well and good for the US president to say that he wants the resources focused on high tech and for people to pursue those jobs but some people will never be skilled enough for these type of jobs.
I can be swung over in favour of outsourcing if someone can show me that it helps the economy and the welfare of Joe Bloggs in the street.

uh oh

Haha I am literally qualified to give a good answer to the questions raised in this thread. That's pretty rare for me. Benchy covered it though.