The world is on edge when it comes to globalization due to jobs disappearing and the circulation of money not being as fluid as it was in past years. Despite the lack of growth in the average income of most economies, inflation continues to rise year after year. You just need to look at the Big Mac Index on Forbes to get an idea about price rises for everyday products.
President Donald Trump has promised to bring jobs “Back to America” and European MP Nigel Farage promoting a similar message by saying “Let’s take back control from Europe” in order to stop local jobs being farmed out overseas.
There are a few major challenges that need to be overcome. Every individual needs to make more money in the market-driven economy. However, people are naturally inclined to purchase based on the cheapest price and based on the immediate benefit to them.
Secondly, technology is advancing at such a rapid pace that many of the jobs are actually disappearing to robots or software, that can do the job much more efficiently and accurately.
Job creation and wealth disparity is important, but how can it be improved globally, given the current economic challenges that lie ahead? Here are a few things that should be considered.
Encourage Private Investing
Should government funding be unavailable, there should be a system that encourages private funding. There are several angel investors and venture capitalists in different hubs around the world, however, if there’s more structure or a galvanized process for entrepreneurs to get access to private funding, this can help their business grow quickly.
Sometimes it isn’t the cash injection that is the challenge for business growth. Access to materials or skilled workers might come at a high cost that it simply isn’t economically viable to invest in those resources. That’s where government subsidies can come in handy.
For example, businesses can improve their cash flow by investing in energy-efficient technology such as LED lighting, however, the initial cash outlay can have a big impact on most businesses. Providing businesses with access to a government scheme can help reduce the cost and get businesses set up with the technology immediately, so they can start benefiting from the cost savings and reinvest the saved money to spur business growth.
Government Funding Schemes
Creating new jobs can be done one of two ways. Either jobs are created in the public sector by the government or they are created in the private sector. Public sector jobs are essentially funded by taxpayers, which means that as the number of jobs keeps growing, it is likely that taxes will have to increase to sustain the cost.
Investing in businesses can create jobs, increase business growth, and also create additional revenue for the government through corporate and individual taxes. Governments should do more to support new and small businesses to grow. The Queensland Government has government grants in place to help small businesses expand and develop.
Rather than the government spending $60,000-100,000 on an individual in order to get 20% of the revenue back in income tax, it would be wiser to invest the amount into 5 businesses who can create jobs and return up to 50% in taxable income.
Another barrier for economic growth is regulation. For all of the good intentions that it serves, it does also make it more challenging for businesses to operate in. For example, Australia has several regulations which protect its citizens quality of life. However, it makes it much more difficult for business owners to operate in since they have higher setup and operation costs.
Compare this to countries with little regulation, it is easy to get setup and to start making a profit. However, it is unlikely that the local citizens will benefit from the business activity. It is a chicken and egg scenario, but the government can work towards implementing a system that works well for all parties.
Reinvesting Back Into The Economy
One of the major issues is the distribution of wealth and how it is tied up in assets that inaccessible to most nations. Taxes are never a popular topic and there is always an ongoing debate between the middle class and the poor, who believe that the rich should pay more taxes. At the same time, the rich do pay more taxes so that the money can be reinvested into the economy but struggle with the decision on how their money is spent.
There was a famous exchange between the Australian government and billionaire Kerry Packer about tax evasion and how he minimized his tax.
Retrain People In Industries Where They Will Be Out Of Work
This is a real risk that needs to be managed in advance before it affects the unemployment rate. Builders could soon be out of work due to 3D printing, and programmers could also be out of work as coding scripts become more efficient and accurate. Technology advancements will leave thousands of people out of work and the jobs simply won’t exist anymore.
In order for people to retain their income, they will need to be trained in another skillset. The government needs to recognize the job economic trends in advance and work with local businesses and entrepreneurs who can prepare the current and next generation for future work.
It’s necessary for these points to be realized and for action to be taken. The world is already on the back foot. Governments need to show initiative and make sure the necessary steps are taken before it is too late!