Lower Labor And Business Costs example essay topic

"But I think what surprised me as much as anything was not to find any stores on Washington Street, or any banks on State. What have you done with the merchants and bankers? Hung them all, perhaps, as the anarchists wanted to do in my day?"Not so bad as that", replied Dr. Leete. "We have simply dispensed with them. Their functions are obsolete in the modern world".

(60) Looking Backward by Edward Bellamy, 1887 Edward Bellamy's futuristic conception of commerce in the 21st century unintentionally created a surprisingly accurate representation of the emerging electronic economy. The use of computer technology and the internet is allowing the creation of greater corporate profit margins at the expense of labor. There is a clear march towards "seamless" electronic transactions that removes many established forms of traditional marketing and employment that have existed for centuries. Funded by corporations, government, and ironically by consumers themselves, the evolving wireless economy promises to accelerate consumption at a blistering pace with little thought about the need for labor to have viable forms of income to sustain consumption. We are on the threshold of establishing global economic methods of manufacturing and distribution promoted by a capitalistic quest for profit that has not considered the far-reaching implications of dissolving existing methods of commerce or consequences of increased production. Capitalists have grandiose plans for increasing production and consumption at the expense of labor, but few plans for sustaining income for labor to support consumption.

They have neglected to recognize or plan for the inherent flaws of capitalism that will have a tremendous effect on our future system of economy and society. At this time, we can only postulate theories about the outcome of our transformation to a digital, global economy. The indicators, however, predict a continuation of trends that do not portray favorable situations for labor or to support a cohesive society. In his book Looking Backward, Edward Bellamy astutely envisioned future methods of transactions that are increasingly becoming our reality, and his description of contrast between old and new world commerce could not have been more clear:" That must be a tremendous saving of handling", I said.

"By our system, the manufacturer sold to the wholesaler, the wholesaler to the retailer, and the retailer to the consumer, and the goods had to be handled each time. You avoid one handling of the goods, and eliminate the retailer altogether, with his big profit and the army of clerks it goes to support. Why Miss Levee, this store is merely the order department of a wholesale house, with no more than a wholesaler's complement of clerks. Under our system of handling the goods, persuading the customer to buy them, cutting them off, and packing them, ten clerks would not do what one does here.

The saving must be enormous". (76 Bellamy) The one person left in Bellamy's depiction has now become the consumer himself and the savings to corporations, as we shall see, are beyond enormous. The emerging new economy is predicated on increasing profits by eliminating previously necessary forms of labor. Using technology, the consumer of today is rapidly becoming more directly connected to manufacturers and in the process has become both the salesman and buyer, who ironically helps to finance the process in numerous ways. To better comprehend the implications of this magnanimous shift towards directly connecting manufacturers and consumers we must investigate the role that industry, government and consumers play in the equation. In doing so, we may identify some of the causes of the evolving methods of electronic commerce and production to reveal some of the collusive government and corporate practices that have united to force a new way of living and working on our society.

Of one basic premise we can be assured; government and capitalism have absolutely no real concern for our well-being and individual economic prosperity. In our emerging electronic, digital age it appears big government and monopoly capital have essentially become one synonymous entity with the goal of using technology to conveniently rule and regulate our existence. A Brief Summary of The evolution of e-Commerce 1999 Business Week issue contained comments about electronic commerce (e-commerce) made by the Chairman of General Electric Corporation, "I don't think there's been anything more important or more widespread in all my years at GE. Where does the Internet rank in priority? It's No. 1, 2, 3, and 4".

The internet business model has allowed the creation of companies with few fixed assets, small labor forces, a direct electronic connection to a global customer base, and freedom from management structures that most established businesses suffer. The new e-commerce world has created opportunities for fantastic returns for those businesses that quickly adapt, and huge problems for those that do not. Comprehension of the evolution of electronic commerce is necessary to help appreciate the predictive outcomes and emerging ramifications of the new business models and help lead us towards demanding attention to be given to the important questions of labor and needs of social infrastructure. The growth of computer technology for business and personal use over the last 25 years is well known.

Using computers for data storage, word processing and manufacturing processes is an acceptable, recognized fact of our existence. The explosive use of powerful inter-connected networks of computers, the internet and wireless communications systems however, is less well known, yet they will have an even greater impact on our lives. The creation of wide-area network systems (WAN) in the 1980's allowed large organizations to connect thousands of users to their main-frame computer systems. The process allowed great savings from the rapid sharing and access of information and helped to increase productivity. The internet, originally developed as a communications system for the military (36 Atkinson), allowed groups of main-frame computer systems to be connected to each other. Like the WAN systems, the public internet connections of the early 1990's allowed individual terminal users to access and share text data and correspondence with any other system in the network, usually over existing telephone lines.

Although traveling over wire, text data was traveling at slow rates of transfer. Further advancements in modem speeds and the use of a web browser, also originally developed for the military (36 Atkinson), allowed the simultaneous search of all inter-connected computer systems and the transfer of images converted to digital signals. The explosion of personal internet service connections offered by America On-Line and other service providers (ISPs) were a result of internet and web browser advancements allowing subscribers to conveniently e-mail communications, including still or moving video messages. The use of fiber optic transmission lines and digital transformers beginning in the late 1990's allowed a tremendous boost in transfer rates and spurred the growth of the latest type of home and business service connections called DSL (direct service line).

Both the ISP and DSL services presently available require the user to purchase a compatible computer system averaging $1,000 and payment of monthly service fees ranging from $20 to $50 respectively. A third type of service called WebTV (now owned by Microsoft) uses a customer's cable or satellite cable connections, existing television and a special keyboard system to allow full connection to the internet for e-mail services and to access the world wide web ( ). It is interesting to note that consumers are willing to spend between $240 to $600 per year for their internet connections plus telephone or cable service charges. Since the mid-1990's, corporations, government organizations and small business owners have rushed to create a presence accessible on the.

The cost savings to these groups for marketing, communications and customer service has been beyond extraordinary. Posted data can be accessed and retrieved without printing, shipping or handling costs for organizations at anytime, any day and from any global location connected to the. It is ironic that the organizations have successfully shifted these marketing costs to consumers who have swallowed the benefits touted by media hype and become willing to purchase the equipment and pay for the internet service connections, ink and paper necessary to complete their transactions. After initially acquiring the technology and using labor to convert data to a digital format, organizations shift or terminate labor no longer necessary, their largest cost savings. Electronic commerce, the actual buying and selling of goods and services by using a computer, has evolved with the internet. Customers now have access to millions of purveyors connected by the around the world allowing them to review inventory or services and complete transactions electronically.

Orders are placed and paid for directly with the purveyors computer system without interacting with human labor. The process allows unbelievable profit margins, aggressive competition and of course decimates entire ranks of labor previously necessary to process transactions. The present restructuring of established fixed site businesses, and emerging "clicks and mortar" (2 Hoque) businesses has created a battlefield of changes for businesses and labor. Already the death of established companies and the birth of "dot-com" companies have permanently changed the playing field for labor. According to a recent statistic released by the Department of Labor, current job tenure is just "3.5 years and dropping" (9 Rosner). Investigating the development of e-commerce it is interesting to realize who has paid for the initial development, and who is paying for the on-going maintenance, research and development.

The answer? We all do in various ways. The American government has spent incalculable sums generated from taxpayers to develop computer communication systems for military and government purposes. Corporations have likewise spent billions of dollars to develop their information and commerce applications, offset to some extent by depreciation tax allowances. Public users have also spent billions to purchase computer systems, software, and to pay for on-going monthly service charges for on-line connections. Individual and institutional stock investors have also poured billions of dollars into the market to fund technology developments, often at a complete loss of their investments.

Due to government and corporate collusion, internet transactions are presently enjoying another three years of freedom from state and local taxes if the on-line business does not have a physical presence in the consumers home state, or if the product is delivered entirely by electronic means (370 Hanson). The highest and most important cost, however, appears to be the effects of the new economy upon labor, and ultimately upon society. The special tax incentives for e-commerce have allowed internet "e-tailers" (2 Hoque) to locate their physical presence in few states; states without sales tax, and states that have small populations. Income from their activity returns little to the on-going maintenance of our national infrastructure or social obligations. In addition, the unfair competitive advantages of internet based businesses that have little fixed assets are compelling established businesses to rapidly decrease costs and reduce labor or perish. The process of "disintermediation" (11 Fiore) via the internet allows the producer, or cut-rate wholesaler, of goods to sell directly tothe consumer.

"Cutting out the middle-man", (8 Fiore) allows lower retail prices and greater profits. Although banks were the first to use a form of disintermediation with their automated tellers (ATM machines), internet companies selling software, music, publications and a host of other goods and services have followed suit. Electronic consumers expect lower prices and instant services making disintermediation a rising trend. The tremendous savings for business is the real driving force behind the explosion of business to business (B to B) and business to consumer (B to C) internet commerce.

Looking at the evolution of one simple example of disintermediation tells the tale of evolving "e-application business models" (2 Hoque). Banking studies have established the cost for a bank teller to complete a transaction is $1.07. The cost for an ATM machine is only. 27 and a customer using the internet to complete a transaction is only. 01, a full 99% savings over the cost of a human teller (129 Hanson). Also using the internet, manufacturers are creating alliances similar to the "pools" or "trusts" of the Robber Barron days to reduce costs of materials and inventories.

A "just in time" (30 Hoque) basis of providing supplies allows companies to avoid the cost of warehousing and the capital outlay of pre-purchasing inventory that is likely, over time, to fall in price. Companies like Dell computer manage their "inventory velocity" (30 Hoque) by hours rather than days. Companies that do not attempt to use the internet will not last long. A recent study by the Center for Research on Electronic Commerce found that the internet economy grew at an astonishing annual 174.5% rate from 1995 through 1998. At over $300 billion today, that rivals entire market segments like telecommunications and the automotive manufacturing industry (Byrnes). In all of these successful new economy cases the increase in profits appears directly connected to an increase in production or sales and a corresponding decrease in labor.

The consequences of situations created by the emerging new e-commerce economy have neither been clearly defined, nor calculated, regarding our economic stability or future quality of life. Inferences can be made however, using data established by corporations championing e-commerce, other data sources and obvious deduction. The highly regarded social scientist Harry Braverman once noted the Marxist view condemned the methods in which "the development of technology takes the form of a headlong rush in which social efforts are largely disregarded, priorities are set only by the criteria of profitability" (142 Braverman). He also condemned the manner that science and technology are used as "weapons of domination in the creation, perpetuation and deepening of a gulf between classes in society".

(5 Braverman). Never before have these words seemed so true. Direct Effects on Labor Our economy, methods of doing business and the role of labor are in a process of monumental change. "Americans perfected a business model that became the most important in the world", reported Allied Signal Company's CEO.

'But it's obsolete now because it requires too much working capital. The Internet allows you to be far more virtual with customers and suppliers. If I don't embrace the Net, I can't reduce those investments" (Byrnes). As Henry Ford's moving assembly line radically altered manufacturing methods and the role of labor, so too does the emergence of the internet economy. The colossal moving force of technology cannot be easily controlled or stopped. The present implications for labor and the quality of life for laborers is not pleasant.

In addition to the effects mentioned in the preceding section, research data provides the following statistics and predictions. While creating new types of employment, the emerging electronic economy is also shifting and terminating all kinds of labor needs. Approximately 30% of all private sector jobs a year are in a state of flux. Between 1994 and 1995 there were 695,000 new jobs created, while at the same time 587,000 jobs were terminated (15 Atkinson). Although a net gain of employment was realized, there is a corresponding increase in the sense of insecurity faced by workers. Government, one of the largest employers is also using the internet to downsize and outsource services, further reducing labor needs.

At the same time, there have been slow overall productivity gains due to a majority of service sector type jobs and an uneven distribution of income. In contrast to the 3-4% productivity gains per year in manufacturing and agriculture over the last 100 years (22 Atkinson), the emerging new economy between 1980's-1990's has seen productivity and per capita Gross Domestic Product growth rates languish in the 1.25% range while income inequality has grown (5 Atkinson). One of the major flaws of the capitalist system is that "to extract profits from workers impels them to keep wages down; their desire to sell consumptive goods stimulates the hype that all workers have sufficient consuming power" (43 Stricker). The evolution of service sector jobs due to internet e-commerce methods are allowing companies to shift workers from customer management or service positions to lower paying hourly sales positions, or to expand without opening retail outlets and the associated labor costs. Wage gains are slowing and the inequality of wages is rising. Between 1980-1996 incomes went up 58% for the wealthiest 5% of Americans but less than 4% for the lowest 60% of the population (23 Atkinson).

At the same time due to the use of technology, the conversion of jobs to part-time, temporary or independent contract have reduced incomes, and the number of layoffs for out-moved working-class positions is becoming more permanent and increasing conditions of long-term unemployment. In addition to insecure employment having an average 3.5-year tenure (Rosner) that is only half as long as other developed nations (27 Atkinson), health care and retirement benefits for labor have also decreased dramatically. The days of stable employment and benefits are gone. Underpaid labor is now somehow expected to significantly increase responsibility for their own economic security. Without revenue sources to provide a standard of living above subsistence, heath care costs and savings for retirement, the majority of America's labor force appears ill equipped to provide for their own security.

Other looming predictions indicate that Medicare will "go broke in 2009" (1 Democrat), and costs for living (utilities, transportation, food and shelter) will increase. Anticipating an increase in social needs, states whose populations are losing employment and taxes from e-commerce are already wondering where the finances will come from to support rising infrastructure and social needs. This is a question capitalism has yet to answer, and most likely has little concern to address. How Will Labor and Society Continue to Evolve?

In 1974, Harry Braverman stated, "Machinery becomes, for most of the working population, the source not of freedom but of enslavement, not of mastery, but of helplessness (134). So it may be that his analysis of the machinery created by the industrial revolution reflects the conditions of our emerging electronic-digital economy. The tasks of labor will continue to change as dictated by the needs of capitalism. Already 20 million Americans are "teleworkers", working online from their homes or other location outside the office (Chronicle), and over 75% of all future employment will require technology skills. Between 1969 and 1995 the expanding computer revolution caused a great transition of jobs from producing or distributing goods to office jobs. By 1999 over 80% of all employees in the U.S. did not spend their time making things, but rather they "move things, process or generate information, or provide services to people" (5 Atkinson).

Projections indicate a continuation of this trend. Cubical farms containing workers connected to computer systems and telephone headsets have become the norm of American businesses parodied by the cartoon Dilbert, and is noted for new worker injuries like carpal-tunnel syndrome and other complaints. As more service sector jobs become automated labor will be shifted. Unfortunately, the largest predicted increases will be the low paying occupations of "cashiers, janitor, retail salespersons, waiters and waitresses.

Together they are expected to account for 13% of all new job growth" (Atkinson 10). Favorable trade agreements and government support of multinational corporations will most likely continue to shift hard-goods production to countries that offer cheaper natural resources, labor, and freedom from environmental regulations. A continued increase in the number of electronically produced goods and services will also affect the needs of labor. Globalization and increased competition will continue to drive the development of electronic media and new services that can be created and delivered from international locations offering much lower labor and business costs. Simultaneously, a slow growth of prices should occur by reducing the ability of American labor to demand wage increases.

The effect of inequality of income, dissatisfying menial jobs, a reduction of social services, and a perception by labor of the futility of education and hard work to achieve success may well portend a disintegrating effect upon our society. A disaffected population may prompt new financial support mechanisms and require more socialized forms of support. Programs similar to those found in oil rich nations (and Alaska) which provide the population with a dividend from oil production may be required from the successful electronics industry, production of natural resources and other industries to provide the public with income necessary for consumption. And why not?

Many of these industries owe their conception and existence to the taxpayers and laborers who have contributed to their development and success. As Bellamy speculated in his futuristic novel, infusing elements of socialism into our economic system may be the only approach available to help placate the masses and meet the increasing needs of future workers. Without viable forms of support, labor will have neither the means nor opportunities to provide for their own existence. Failure to provide labor with tangible support mechanisms may provoke the socially destructive, "explosive developments", (315) that Braverman predicted would eventually occur. In the future age of e-commerce, labor may have no other choice.

Bibliography

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