Financial Jobs Killed in Tens of Thousands as Industry Shrinks, Global Oversupply of Labor Globalization Consequence

Financial Jobs are being let go in the tens of thousands by European and USA Financial Institutions. The Financial Industry has become too huge as a percentage of the global economy with any value creation to say something like the IT industry. The share of  the market cap of the stock market had become too high during the boom boom years of 2008 and it is continuing to go down.Despite the best (some would say the worst) effort of the governments to prop up the Too Big to Fail Banks,jobs are being let go as there is not enough work. European Banks are shrinking their balance sheets as they are too leveraged and insolvent. Without the ECB crutch,almost all of them would go under.

London and French Banks are selling divisions and shedding jobs to become more leaner and survive till the government keeps them on life support. Major financial centers of London,New York are the worst hit in terms of financial job losses.

In a separate report, the daily said that Societe Generale was considering about 1,580 jobs cuts at its corporate and investment bank. “The job losses will include 880 voluntary departures in France, where most of the division’s employees are based, and 700 job cuts in other countries,” Financial Times said, quoting a spokesman of Societe Generale.

In a statement issued on Wednesday, Societe Generale had said it was looking at reducing the number of positions in its corporate and investment banking division by about 880 in France.

Global Oversupply of Labor

Labor in the current environment is currently totally screwed to put it mildly due to massive oversupply of labor. This is because the millions of graduates passing out each year in India and China do not have enough opportunities. The information revolution has meant that these graduates can be employed for super low wages by developed nation companies . Also while the globalization of capital and trade is almost free,the visa and immigrant restrictions means that labor cannot move freely leading to massive distortions.  This favors the companies at the expense of labor.

One of my theories is the Global Labor Cost Arbitrage is that a lot of distortions and opportunities for arbitrage that we are seeing in the world today is because “Labor is not Globalized while Capital and Trade are “.However the Restrictions on the “Globalization” or in other words Free Movement of Labor is being reduced through the following trends

1. Improvement in Communication and Transportation, that has given rise to  Outsourcing
2. Creation of regional blocs like the NAFTA,ASEAN ,EU etc.  has allowed broken the labor barriers within the bloc between the members.This has resulted in “winners” in the form of the “poorer members labor” and  “losers” in the form of “richer members labor” .
3. MNCs like IBM,Applied Materials with operations spread across multiple countries exploiting this situation by moving most of their labor requirements to low cost locations .

Asian White collar workers face Unemployment and Low Wages due to Increasing College Education

The spectacular growth in Asian economies like China,South Korea,HK,Taiwan over the last two decades has raised millions from poverty to a middle class life.This has led to increasing education levels among the new generation of Asians.Parents have poured a large part of their earnings into children education which was seen as a ticket to a better life.But many of these newly entered work force participants are not finding the pot of gold at end of the rainbow.This is because the population of college graduated workers has increased significantly putting  the laws of supply-demand against these workers.In fact  the wages of college educated workers have declined in some cases.

Perversely for the these educated Asians, the wages of Blue Collar workers has increased at a much faster pace compared to the White Collar workers.While the wages for highly in demand skill-sets and experience approach those of the western counterparts , the wages for those with little experience and “commoditized  college degrees” continues to remain stagnant . This has been the experience in many countries across Asia like South Korea , India,China.Here are some examples of this wage pressures at work