Nike is a huge supplier if athletic shoes for the world these days. Philip H. Knight, the founder of this corporation came up with an idea of an athletic shoe at the track field of the University of Oregon. Now it has become a leader in the global economy. Nike has helped the economy by employing more than 500, 000 people, worldwide. The company has contributed in finding a positive policy for minimum wage.
Minimum wage laws usually don't help who they " re originally set out to. Now with Nikes' minimum age requirements it helps those it was naturally set up for. The minimum age requirement also prevents teenagers from dropping out and taking on full time jobs at Nike. Philip H. Knight knows people respond to incentives, principle 4 of economics. So he established loan programs, continuing education for employees and increased wages.
These incentives are good for a company to give their employees. If the employees continue with their education's and still decide to work for the company, the company has made a good investment with an employee who already has a familiar background with them already. The employee benefits also because they furthered their knowledge and wages with the company. Nike is in a very competitive market, they are definitely not a monopoly by no means. They " re are many buyers of shoes and now the market has quite a few sellers too. Adidas, Sketchers, Puma and Tommy Hilfiger are just to name a few of Nikes' competition.
Nike is placed in the market in second just following Adidas. The shoe companies are substitutes for each other which makes for an elastic market. Consumer's who aren't set on one name can easily pick between all the brands to find the best deal. With Nike and Adidas in the lead it is apparent that the name makes a different. Nike doesn't spare in the advertising area in 1997 they spent $978. 2 million.
The University of Oregon is threatening to join the Workers Rights Consortium. Knight, a believer in the labors Fair Labor Associations against the University joining the WRC and plans to contribute nothing if they go ahead with it. Both parties need to weigh the opportunity costs of their decisions. The University of Oregon is looking at a 50 million dollar opportunity cost if they join the WRC. This is a huge extranality to the students of Oregon.
To give up on receiving that kind of donation really hurts the students. If the University of Oregon and some other schools decide to join the WRC the impact could be one of hurting the economy. There will be less need for employees because the donations of athletic wear will decrease significantly. The equilibrium will change resulting in a revenue loss to the corporation and to the employees that will no longer be needed.
Nike is trying to deal with this through private solutions. Knight authorized the PricewaterhouseCoopers factory monitoring group to give the results on their visits, because he says they have nothing to hide. Students from the University were even permitted to monitor some of the manufacturing sites. Knight is trying to use the Case theorem in solving this problem. Nike corporation has already paid significant amounts of Pigovian taxes to improve air quality and temperatures in their footwear factories.
Since none of the factories had to shut down the taxes were apparently not that horrible for Nike. Nike at this time knew the situation could not be resolved. Nike has changed there working environments for their employees from past mistakes. Hopefully Nike and the Universities can come to some reasonable conclusion..