Livelihood Economy From Blue Collar to Gold Collar

Livelihood & Economy: From Blue Collar to Gold Collar

Secondary Activities • Manufacturing industries: turning raw materials into usable products – adding value to a raw material or resource – “blue collar” jobs

Location • Manufacturer’s considerations: – – – 1. 2. 3. 4. 5. Cost of raw materials Distance from them & from markets Wages of labor Outlays for fuel Capital availability & rates

Principles of location • • “Ground Rules” 1. Spatially fixed costs 2. Spatially variable costs 3. Profit maximization, or least total cost

• 4. Locational search for minimization of variable costs • 5. Transportation charges – Accumulation & distribution = orientation • 6. Manufacturing industries – Interdependence, linkages

Location factors • • • 1. 2. 3. 4. 5. Raw materials orientation Power supply orientation Labor Market orientation Transportation

Spatial orientation

Types of transportation • Water transport • cheapest for long haul / one leg of transport • oceanic, inland routes non-perishable bulky products • containerization • flexible • Rail lines • • cheap for long-distance / one leg of transport non-perishable bulky products containerization inflexible

Transportation • Trucking • cost effective for local movement & perishable products • low efficiency for long-distance & bulky products • containerization • high maintenance costs • flexible • Increasingly combining water+rail+truck transport costs • containerization streamlines this process

Transportation • Pipelines • • efficient, speedy for liquids, gases multi-purpose expensive to install inflexible • • for industries not locationally significant long distance passenger, high value freight expensive flexible • Air transport

Distance & rate efficiency

Containerization -2004: more than 75% of all international shipping -more efficient ships can carry over 8000 containers -need for deeper ports, dredging

Transportation costs • Freight rates – Charges for loading, transporting, unloading • Fixed costs – company’s investment • • • 1. 2. 3. 4. 5. land plant equipment terminal – loading, packing, unloading line-haul – over-the road-expenses

Outsourcing • Maquiladora – Mexican/American border

• Processed products can bear more costs • Each shipment bears costs of freight rates and fixed costs

Transportation considerations • Usually locations that fall between material sources and final markets are more expensive: – two short hauls = more expense than one long haul • 2 exceptions: – Break-of-bulk-points – In-transit-privilege

Modeling theories • Weberian (Alfred Weber, 1868 -1958) • Least-cost theory – variable costs • Optimum location for manufacturing minimizing three costs: – relative transport costs, labor costs, agglomeration costs – Weber concluded transport costs are major consideration • If agglomeration or labor costs are sufficient this can change sole determination by transportation costs

Weber’s locational triangle Diagram costs: weight, movement, distance

Equilibrium point – from “pull”

Locational Interdependence Theory • When the locational decision of one firm is influenced by locations chosen by its competitors – Creates spatial monopoly – Maximizes return, does not minimize costs

Profit-maximization approaches • The correct location of a production facility is where the net profit is greatest • Substitution principle • “Footloose” firms – Neither resource or market oriented

Additional locational considerations • 1. fordism • Mass production, assembly lines • 2. flexible manufacturing • Just-in-time production • Labor flexibility, more skills • 3. agglomeration • Mutual benefit concept • Sharing of infrastructure • Can grow due to multiplier effects • Can lead to deglomeration/diseconomi es

• 4. comparative advantage • Specialization • Outsourcing / maquiladoras • 5. additional imposed considerations • Land-use zoning controls • Environmental standards • Government induced development • Local tax abatements

Transnational corporations (TNCs) • 21 st century = 62, 000 TNCs employing approximately 56 million workers of world’s largest economies over ½ are TNCs primarily in primary & secondary economy sectors

Investment locations • Foreign direct investments – concentration in 10 -15 countries – south, southeast, east Asia (China is biggest), Latin America & Caribbean – increasingly directed towards developing countries

primary & secondary investments • Secondary: • computers, electronics, petroleum/mining, motor vehicles, chemicals, pharmaceuticals • Primary: • wheat, maize, coffee, cotton, iron ore, timber • Bepal, India

World industrial regions areas not continuous or “solid” as map suggests

industrial regions

Tertiary activities • Services to primary & secondary sectors, to the general community, and to the individual • Broad term covering large range of activities • Restricted to lower-level services related to day-to-day needs of people

“postindustrial” economies • Developed world transitioned from secondary economies to tertiary & quaternary • Pressures: • • • Rising energy costs Labor costs Growth of TNC Outsourcing Transfer of technology to developing countries

United States • Most advanced “postindustrial” economy

• Japan, Australia, Canada, Israel, Western Europe

• Growth of tertiary activities is characteristic of complex social, economic, administrative structures • Locational controls for tertiary activities: market oriented • Change from subsistance, in-house lifestyle – Home & business “outsourcing” of certain activities • Housecleaning • Fast food, prepared food, restaurants • Service maintenance

Tourism • Travel undertaken for pleasure, rather than business • The single most important tertiary activity, and world’s largest industry in jobs and total value generated – 250 million jobs generated – official employment positions + 15% of world’s work force – informal sector number is unknown – 2000 = $400 trillion value – 14% of world’s GDP • Tourism represents important opportunities to the developing world

• Sex tourism – So East Asia, South Asia, Central and South America • Eco tourism • Global warming impacts on tourism – Northern latitudes – mountain regions

Sex tourism • Estimates: 1 million children drawn into prostitution annually (ECPAT; UNICEF) – Overwhelming majority are female • Drivers: poverty, turbulent politics, unstable economies (over-population? ) • Victims live in constant fear: – Sadistic acts by clients – Abuse from pimps – Apprehension by police

Contributing factors: • • • Internet Anonymity Availability Affordability Lack of child-protection laws in foreign countries • Low risk of detection

Quaternary activities • “white collar” jobs • Advanced form of services involving: – – specialized knowledge technical skills communication ability administrative competence

• Knowledge/information sector: – – Production Storage Retrieval Distribution • Location – Can be spatially isolated from clients – Dependent on communication capabilities – Spatially “freeing”

Quinary activities • “gold collar” professions • Special highly paid skills of CEOs, government officials, researchers, financial/legal consultants • Location specific: – major metropolitan cities – prestigious addresses /streets /universities /research parks /medical centers /signature buildings

THE HIERACRCHY OF INTERNATIONAL FINANCIAL CENTERS