Impact of the Credit Crunch on the Workplace and Politics

Impact of the Credit cranch on the Workplace and PoliticsSocial gentleman Economy and UKGoernmentEmployers, Employees and the UnionsConclusionsBibliographyThe confidence mash in 2008 is swiftly creation followed by an imminent globose break, perhaps the worst nook for many a(prenominal) decades. Irresponsible l completeing, mis-management by the lodges, the gift freezes in indus stress and the general economic climate means that we extenddt joint no longer take for granted our business lines, homes and fiscal security. In 2009 the tide is turning from boom, very(prenominal) in wholly probability to bust in just a few months, although it was claimed by both(prenominal) analysts that the break started proper half look d hotshot 2008.The situation does non look to improve any duration soon either, as Mervyn King, the governor of the Bank of England was cited in the Daily electrify of 26th October, 2008The combination of a squeeze on authoritative bring in pay and a decline in the availability of reliance poses the venture of a sharp and prolonged slowdown in domestic demand. It this instant canvassms belike that the UK economic system is entering a recession. (Jonathan Sibun, Daily Telegraph, 2008).So we see that t bourgeonher can be a b come discover of the c sustaint of factors which provide the al-Qaida cause of a recession. The end result of a recession is not exclusively the loss of business, line of works, reduced cash flow and fasten of pecuniary belts the affectionate, economic and governingal impact this has on employers, employees and the politics. Employer and employee relationships ar as well a side effect of the environment within a recession. Does the balance of king change? Do employees become respiteive? Do managers become more than fearful and does this affect their judgement in the workplace? Many elated and productive workplaces ar suddenly not so happy when a citation squash hittings. This p aper investigates the implications of a recognition squeeze on relationships both at the workplace and in the political bena.SocialFrom a social view, the effects of the credit crunch atomic number 18 already organism evidenced. Housing repossessions ar on the increase in the UK and flock are having difficulty keeping up with their owes. Another factor is that the number of joke losses is on the increase and this is expected to continue in 2009.The social impact this has on people is very often not describe by the media. For instance, people who would normally go on holiday with their friends and regard social outings whitethorn no longer do so after losing their job. The impact of a credit crunch and recession is inevitably job losses. This affects the person being laid off not except monetaryly, but in terms of self confidence and a feeling of hopelessness for well-nigh. Some people after being make redundant may never work again, due to their age or the in studry t hey prevail worked in, which may be any(prenominal)thing they hold in been involved in all their life.The credit crunch affects relationships generally, but also marriages. Husbands try to hold off impressive their partners when they lose in that respect jobs. The feeling of failure abounds and it also becomes a concussion when it is not possible to find another job immediately. The credit crunch seems to hit men particularly hard, as pride and status digit out their parts when he has to rely solely on his wife for their important income Traditionally, the man provides and for a man to lose his job, its not just close money, its loss of status, which can be a huge knock to his confidence. Steve Miller, cited in (Becky Howard, 2008).It can cause relationship breakdowns as There is also a real danger that the woman may become angry and resentful (Becky Howard, 2008). This may be due to women become the main breadwinner and also the submit to perform duties at home, like cle aning, ironing and other household chores. The time article points out a number of ways to assist couples by dint of and through a crisis such as the credit crunch and the loss of a job.The balance of power can shift from an even situation, in a relationship to a dominant partner, when both partners ingest jobs or in the case of the sole breadwinner, it can cause even more difficulty.World Economy and UKThe economic effects are also being seen, as employers are trying to emphasise the importance of pay restraints as companies try to avoid job lossesIf employees understand the competitive pressures facing their organisation, they are more likely to understand why pay restraint in the accredited economic environment is critical. (CIPD, 2008)However, pay is only one of a number of unloosens. Mortgage repossessions are on the change magnitude by 40% in the last 12 months (Economics Help, 2008). It is claimed that this is only a gnomish residuum of the total mortgage market in t he UK however. In the US loans to sub-prime mortgage markets proved highly wondering(a), and these loans were whence embedded into the whole financial brass (Economics Help, 2008). This in turn affected the whole of the global capital markets. thereof the adult male frugality is trustworthyly in very poor shape. each country is trying to solve the crisis in their own way, but some countries in Europe are following the UK lead were VAT is concerned, in that they aim to reduce it.On a population aim, the saving has probably been in downturn since December 2007. They were predicting then that the economy would have upcoming problems and so it has been proved. For instance, this repute by World Economic Update (2008) states for the US economyThe U.S. economy is already in a recession it started in December 07 and it exit last four to six quarters. Negative developing starts in the first quarter of 2008. The former the latter may, I guess, or may not end up being true, bu t for certain its going to be unimpressive.The akin article also suggests the economy of the US exit be severe and protracted rather than mild. The US is the richest economy in the initiation, and when something happens on the case of the current credit crunch it affects the world economy.It is also stated that many emerging markets are not now affected by the US economy, and these should provide a cushion for the b oilers suit world economy, even though the banks of the emerging economies are also tightening their belts. It is stated that countries, such as Brazil, China, Russia, Peru, Poland and Hungary are all in harvest stages and not directly affected by the US as they in the first place issue with commodities. There has also been a shift away from the US in terms of the commodities markets (World Economic Update, 2008).The question we need to ask are the emerging markets enough to help stave off the imminent recession? The way that emerging markets can assist the glo bal economy is through cheap commodity hurts such as metals and agricultural products. Unfortunately however, the price of oil continues to escalate in the light of a world oil shortage.The repercussions of the current financial crisis were discussed by Andrew watt (2008) when he states that there will be a combination ofShare-price collapseBlockages with the banking systemReduced annoy to bank loans, and more than expensive bond financingresulting in a decline in corporate investment, which in turn will have knock-on effects elsewhere.Much can be gleaned from the current crisis for future generations however. Andrew Watt has identified a number of other possible factors which have a bearing on the world economy and the UK. For instance, he points out that there has been a lack of regulatory institutions required for global finance, throughout the world and in Europe. He also claims that income at the national level has go in that the poor borrow more, and speculation by the ri ch has made them wealthier. This really is a case of the poor getting poorer, and the rich getting richer. Lack of low interest pass judgment, lack of regulation in the financial sector, risk taking and tax competition including the EU have also contributed, in his opinion (Andrew Watt, 2008).From this we can assume that although the US crisis was the initial spark, that the accelerator pedal was already ready to light in the world economy and so we are all affected by the end result.The following figure from this report shows a summary of the events of the last 12 months or so, resulting in the credit crunch and imminent recessionOne affect of the economy the credit crunch has had in the UK is the reduction of house prices and the price of ethicals in the shops, which have reduced dramatically in the last few months in order to keep consumers interested thus keeping the finances satiny in the shops.The credit crunch has been blamed on a number of factors, and some unusual idea s emerge from various parts of the world, who all deal with the situation in a different manner. For instance, President Sarkozy has made calls to end inappropriate ownership (David Charter, 2008). The concern is that line industries will fall into foreign hands. The ideas are that each country should use sovereign wealth bullion to take stakes in key industriesNicolas Sarkozy risked blowing apart the European consensus over how to deal with the financial crisis by proposing today that each country shew sovereign wealth funds to take stakes in key industries to stop them falling into foreign hands. (David Charter, 2008)The theory is that non-EU countries may take usefulness of the current crisis, who are not affected by it and therefore it would change them to have an advantage in investing in shares within EU industries when they were at their cheapest. Not all the EU countries agree with this approach as stated, but even during his EU presidential year it is debat adapted i f he can win approval from his EU partners.GovernmentFrom a political perspective, some people will leave the original credit crunch was caused in the US, and this has had a knock-on effect on global economy. One interpretation of a credit crunch is rapid decline of credit that it is outstandingly large for a given stage of the business cycle (Bernanke and Lown, 1991).However, one of the key causes of the current credit crunch is said to be slaphappy lending in the US. However, it is fair to say that although the credit crunch originally emanated from the US, that irresponsible lending has also been occuring in the Uk and in Europe, but not on as large a scale.From a political perspective it is being stated that the UK government could have done more to learn banks who were lending irresponsibly, and that the credit crunch has shown that financial institutions can easily debauch systems of self-regulation. (Economics Help, 2008)A few years ago, house prices were going through the roof, and this cardhouse would eventually burst, as it inevitably did. Gordon Brown the current prime minister, did tell apart that this would happen, and as Chancellor of the Exchequer at the time thought the issue had been addressed and avoided a boom and bust scenario, but this was obviously not the case (Alex Barker, 2008).Now that Gordon Brown is the Prime Minister, some of the earlier issues have come behind to haunt him. Politically, a credit crunch and recession is always good for the opposition, as they can claim that the current government of the day is to blame for the current economic climate in this country. David Cameron, the attraction of the opposition has made this point often, and has stated that the current labour government could have done more to avoid the consequences.Gordon Brown points out that the current crisis is global and has recently instigated a number of steps to avoid the crisis adequate even more serious in 2009. Banks all over the world ha ve been in difficulty all over the world. The collapse of the Lehman Brothers bank in the US was soon followed by a crisis of one of the largest banks in the UK, Halifax Bank of Scotland (HBOS). A recent merger between Lloyds and HBOS will provide a super bank and will avoid HBOS going the same way as Lehman Brothers. The government has supported the merger.Another recent, but risky step is to plough prevalent money in the banking system, and by doing so the government hopes the banks will continue to lend to each other and at least keep the financial syste fluid. Along with this, there has been a reduction in VAT to 15% from 17.5% so that consumers will continue to kick the bucket and keep business operating. These are risky measures, and longer term it has been pointed out by David Cameron, that the UK tax payer will have to pay stake an increased deficit. Only time time will tell if Gordon Browns policies will enable a swifter recovery or take the UK further into debt. As some analysts point out, this is not a normal situation and ingrained situations call for extreme measures. This is certainly the case for Gordon Brown on a political level.Employers, Employees and the UnionsOne thing is certain in 2009, relationships between employer and employer are sure to be tense in 2009. A survey report was commissioned by the Chartered Institute of personnel department and Development (CIPD) in September, 2008 around this subject. The following table from this report summarises the main issues around employer/employee relationshipsSo what are the anticipated changes in regard to the effects of the Credit Crunch to employer/employee relations?The following table from the same reports highlights the expected changesOn the instance of it, if we analyse the two tables we can see that although most agree that there will be problems in the current credit crisis, that the only likely benefit longer term is that the employers will engage with their employees on an in creasing level.However, it is said that there is a contrast of opinion between the public and private services with regard to employee amour, asLooking at the results in more detail, however, there is a marked contrast in attitudes between private and public services. In private services, 51% of respondents identified employee engagement as the single most likely development, compared with only 29% in public services and an average across all sectors of 43%. (CIPD,2008)It seems that partnerships with occupation unions are very low on the agenda, but again it depends on the sector aspartnership is seen as among the three most likely developments by 46% of respondents in public services but only 11% in private services. (CIPD,2008).The wait and see scenario was also a favourable option. This would make perfect sense seeing as no one yet has a clear picture of how the recession will develop in 2009.So how will all this effect relationships on the shop floor and in the office? Well, c ooperation is the key to a triple-crown relationship for both employers and employees alike. It will be the case that in some organisations that job losses will be inevitable, and the unions and employees will be able to do very little as a result. In some cases, it will just be a case of management and unions working(a) together to alleviate the impact as much as possible, and by providing assistance to those employees who will need to be looking for another job or training.In fact, if you have been made unemployed during a recession and there is little likelihood that a new job in the same career will be practical (in some cases), then training during the downturn may be a very good option. The reasoning behind this is that when the economy returns to normal the employee will be let out placed to get themselves back on to the job market.Some people may be concerned about the prophylacticty of their jobs in 2009, and for very good reason. It is claimed that the indebted young p eople will be the hardest hit (Iain Macwhirter, 2008). It is claimed that the level of unemployment will have reached 3 million by 2010.It is the conciliative labour market which usually receives the initial job losses, such as freelancers and contractors (Iain Macwhirter, 2008). From a company management perspective it is financially sound to flak catcher the expensive contractors first. There is also little complication in doing this legitimately as there is with permanent employees. However, the sign of a contractor being fired can cause panic amongst the permanent employees in the workplace, as they know that they could easily be next on the list.Ironically, once the dust has settled and companies find themselves short staffed on the upturn it is contractors who are the first back in to assist. Unlike a redundancy situation based on last in, first out it could be said that with contractors and the credit crunch it is a case of first out, first in.The effect of the credit crun ch will not only affect the lower level employees, but jobs in banks, and professions i.e. the middle income groups. This will be a real blow to self esteem and confidence to some employees, and it is also something the employers and unions must take into account when wielding the axe in the name of survival. There is no longer a predictable future for anyone, anywhere as a result of the credit crunch. This is emphasised byCertainly, the first to be hit will be those at the bottom. But they are likely to be joined by large numbers of articulate, middle-class individuals shaken out of the financial, media and peripheral service occupations from aroma therapy to management consultancy which have grown up during the long boom. (Iain Macwhirter, 2008)We have seen that the credit crunch affects everyone from the top down, including governments, large and small organisations and individuals. We have seen the ways in which people can be affected. Governments lose credibility, organisati ons lose valuable staff, and individuals lose their self esteem and confidence.In analysing the credit crunch we see that although it seems the US problems was the initial spark, it was basically a financial accident waiting to happen, and on a. global scale. However, we have to ask ourselves if the rest of the world can be protected from the mistakes made in the US. Should we all insulate ourselves from this happening on such a large scale again?In looking at possible solutions, we have many suggestions and some of these are risky, but possibly may work. In the UK only time will tell if Gordon Browns ideas of ploughing special funds into the banking system and reducing VAT with lower interest rates will stimulate the economy enough to allow progress through what is sure to be a very difficult period in 2009 and beyond.The surprising thing and perhaps most worrying is how quickly the economy turned from 2007 from what was a relatively economically sound period to its current state. For future generations, much will be learned and there are sure to be large scale changes, especially in the banking sector. More regulation is sure to follow and huge bonuses for some could be a thing of the past. Such is the effect of the current crisis.Journals/ReportsChartered Institute of Personnel and Development (CIPD), Survey Report, 2008World Economic Update, April 25 2008 available fromhttp//www.cfr.org/ outlet/16111/world_economic_update_rush_transcript_federal_news_service.htmlAndrew Watt, The economic and financial crisis dealing with therepercussions and the causes./ Presentation to ETUI Seminar The economic and financial crisis Elements to realize a new paradigm 8 December2008Bernanke, Ben S., and Cara S. Lown (1991), TheCredit Crunch, Brookings papers on EconomicActivity, no. 2 205-47.NewspapersIain Macwhirter, New StatesmanEconomy, How safe is your job?Published 27 November 2008 available fromhttp//www.newstatesman.com/economy/2008/11/middle-class-labour-jobsJona thon Sibun, UK nook is here to stay experts warn, Daily Telegraph Online, 10/2008 available fromhttp//www.telegraph.co.uk/finance/economics/3259483/UK-recession-is-here-to-stay-experts-warn.htmlBecky Howard, The credit crunch hits relationships and marriages, clock Online, December 6, 2008 available fromhttp//women.timesonline.co.uk/tol/life_and_style/women/body_and_soul/article5292365.eceDavid Charter, From Times Online October 21, 2008,Sarkozy calls for halt to foreign ownership available fromhttp//business.timesonline.co.uk/tol/business/economics/article4984670.ece networkEconomics Help, Who is to Blame for Credit Crunch? 2008, accessed on 03/01/2009 available from http//www.economicshelp.org/2008/08/who-is-to-blame-for-credit-crunch.htmlAlex Barker, sleepy at the Wheel? ,December 15th, 2008 by Alex Barker accessed on 03/01/2009 available fromhttp//blogs.ft.com/westminster/ socio-economic class/credit-crunch/