Major events in our country and around the world tend to have economic advantage

Question

Major events in our country and around the world tend to have economic advantages for some segments of society and disadvantages for others. Determining who benefits can be tough for negative events, but it’s especially important in order to prevent the unscrupulous from capitalizing on them. Consider the following events and trends, and determine possible winners and losers from an economic standpoint:

a. The Hurricane Katrina
b. The influx of illegal immigrants in the U.S.
c. The 30% U.S. high school dropout rate
d. The aging population in the U.S., Europe, and China
e. The rising price of oil worldwide

Explanation / Answer

a. The Hurricane Katrina:
Losers: Due to a natural disaster like hurricane, due to mass destruction of infrastructure and industries there will be a reduction in output reducing the GDP, the stock market crumbles and peoples loose their jobs and also lives.
Insurance companies will loose as they have to settle the claims for life and property losses.

Winners:
As there is uncertainty over the stock prices, alternative investments like gold will be demanded more increasing its prices.
There will be huge revenue assured for the construction companies, as there will be new constructions.
Stock prices of constriction companies will also increase.


b. The influx of illegal immigrants in the U.S.
This makes an increase in the labor force (supply), so the wage rate will decline.
But as these are illegal immigrants, they will be given a lower wage comparable to the other employees.
Losers:
Legal work force is affected as they will loose their jobs to these illegal immigrants, and due to availability of more labor the wage rate will also decrease.
Winners:
Employers will benefit as they can get a cheaper labor, who cannot complain .

c. The 30% U.S. high school dropout rate:
Losers:
Economy looses as the countries labor productivity decreases, decreasing the average income earned.
Winners:
Small and medium level industries will be benefited as they have a labor for a lower wage rate.


d. The aging population in the U.S., Europe, and China
Younger the population, more the productivity.
As the population growth rate is declining there is an increased shortage of young work force in these countries. This will highly effect their labor productivity, in turn affecting the economic growth.
The countries like India which has relatively a larger younger population will have a higher prospect of economic growth in the near future.


e. The rising price of oil worldwide:
Winners:
The oil suppliers will be very happy with the increased demand for oil, as they can generate more revenue and profits.
Major benefiters: OPEC countries.
Small and fuel efficient car manufactures will benefit as the increased oil prices will increase the demand for these hybrid cars.

Demand for alternative energy sources which are a substitute for oil will increase.
Substitutes for oil: Electricity, Nuclear power, solar and wind energy, bio fuels.
People also try to travel in common transport systems.
Pollution can be controlled

Losers: General consumer will loose with the rising oil prices.
Luxury car manufacturers will face a decline in demand due to higher oil prices.

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