Headwinds Faced the U.S. Business

Headwinds in business are conditions that complicate growth and progress. These economic situations can be such events as natural disasters, rising costs, and credit crisis. They significantly impede the economic growth. Therefore, headwinds are negative for the economic development and growth. Both legal and illegal immigration hamper wage growth. The large population of native-born residents bears significant net costs due to the fact that poor and uneducated immigrants widely use a variety of public services, including education, environmental protection, health care, emergency, and social services. Due to the employment of undocumented workers, businesses undercut wages and leave many American residents without jobs. So many individuals use such social programs as schools and hospitals, thereby increasing taxes and national debt. Unprecedented fall in real wages has significantly affected unemployed individuals who have lost their jobs and incomes. And even long-term employment could not prevent them from losses. Colleges recognize that they have to respond to the seller’s market challenges by raising prices. Legal and illegal immigration, insignificant increase in real wages for the past ten years, and the high cost of attending colleges are significant headwinds faced by the U.S. business, a national economy, and individuals; they have to be properly addressed to avoid dire consequences for every involved party.

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Legal and Illegal Immigration

Nowadays, the United States of America has become a home to the large immigrant population in the world. Unlike developed and wealthy European countries, individuals coming to the USA assimilate faster, and, therefore, the immigration policy has become a highly controversial global issue that significantly affects the way business runs in the country. Despite the fact that most debates and disputes are focused on cultural challenges, the economic effects of immigration on entrepreneurship and national economy are evident. Economic analysts question the belief that the inflow of foreign labor reduces wages and increases the level of unemployment of American residents. However, academic research and economic predictions reflect the fact that immigration does not significantly affect wages in the long-term perspective, and economic effects of this international movement bring positive outcomes for the overall economy and Native Americans. Legal immigration increases the labor supply, enables companies to increase investment so as to compensate the possible reduction in capital and to prevent average wages from declining. Moreover, cross-cultural experience increases opportunity recognition capabilities that have direct implications for policymakers, entrepreneurs, and business structures (Vandor & Franke, 2016). Immigrants are often regarded as imperfect substitutes for American residents in the labor market. It means that there is no severe competition for the same jobs and significant pressure on natives’ salaries. This fact provides a clear explanation why the competition from new immigrants mostly affects earlier newcomers, who faced a considerable decline in wages during the first year of their new experience. However, during the last few decades, the immigration has increased average wages of American workers. Besides bringing unique culture, legal immigrants significantly contribute to the ingenuity and the development of innovations in the United States. They become technology and science graduates, who, in the course of time, account for a high share of patent filings and hold high positions at top venture capital-funded companies (Vandor & Franke, 2016). In addition, the flow of immigrants produces significant opportunities for less-experienced, skilled and qualified American employees to acquire necessary expertise and specialization in their professional activity and to increase productivity. Immigration, if it is legal, significantly improves the state’s fiscal situation and the way business runs. Immigrants pay taxes, and, as a result, freely and uninterruptedly use services that they need. However, American residents living in the states with a significant number of less-skilled, educated, and qualified immigrants face great tax problems. The main reason is that foreigners pay fewer taxes but they can easily send their children to public schools and enjoy the same benefits provided to American citizens. In general, the effects of legal immigration on the U.S. economy and entrepreneurship are positive. Immigrants are unlikely to replace native-born employees or reduce their salaries, though some short-term dislocations in the labor market may occur. From the economic perspective, illegal immigration has a significant influence on the business in the USA, as it may undermine the financial situation and security of legal residents. In addition to the fact that illegal immigration reduces wages, unregulated and undocumented employees often receive lower wages. It results in the fact that the salaries tend to decrease in a particular region and for a specific occupation. As a result, illegal workers become a reason of different financial problems on local and federal levels.

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No Significant Increase in Real Wages for the Past Ten Years

For the past ten years, the USA has faced unprecedented falls in real wages, and the financial crisis of 2008 only aggravated the issue. The decrease in real wages did not occur in previous economic downturns; the growth of average real wages was hampered, but there was no significant decrease (Gregg, Machin, & Fernandez-Salgado, 2014). During past recessions, almost all employees, regardless of their income level, got increased salaries. However, unemployed individuals, to a great extent lost their jobs and incomes. The majority was unemployed for a long time. During the great recession and its aftermath, the economic losses have been more evident, and the situation with salaries was strained at that time. Since 2007, the real wages of an ordinary worker have fallen by nearly 8-10% (Gregg, Machin, & Fernandez-Salgado, 2014). The decline has occurred not only in regard to the wage distribution but also significantly affected living standards of most workers, except those, who have been holding high posts. Young people have been particularly suffered heavily. Older adults have also experienced real wage falls. Youth has significantly suffered as they could not find a good, decent job, and almost one million people aged 25 have been unemployed. A quarter of them has been unemployed for almost a year. Even if young people had found a job, it would have been low-paid, and they would have got fewer working hours. In most cases, they have been engaged in part-time, not a full-time work. For the majority of American workers, after taking into account the inflation, real wages have been stable or falling for decades. It has occurred regardless of subtracting or adding jobs. Employees have not received compensation in cash money. Retirement contributions, health insurance, transit and education subsidies are a part of the social benefits package. And salaries and wages are visible components of employee compensation. Wage stagnation has been the core issue raised by economic analysts, experts, and specialists; however, they still cannot reach consensus on what factors and forces drive it. Rising benefit costs, particularly on health insurance provided by employers, can constrain hirers’ willingness and ability to increase salaries. Other factors that play a crucial role in this process include a long lull in the labor market; a backlog in education compared with other countries, the significant decline in well-paid jobs, and a gradual shift towards job growth in the low-wage industries. Last year, the U.S. employees experienced low wage growth. In the period between 2013 and 2014, individuals holding Bachelors’, Masters’, and other advanced degrees experienced the stagnation and falling of real hourly wages (Gould, 2014). However, there were few exceptions. Considering the period between 2013 and 2014, hourly wages decreased or stagnated even for workers holding bachelors’ or advanced degrees. If to compare 2014 with 2007 (the year before the great recession), hourly salaries for most of the U.S. workers have been falling or stable (Gould, 2014). Since the 1980s, the situation has not changed drastically (Gould, 2014). Most of the U.S. employees have experienced the decline and stagnation in hourly wages despite the significant GDP and net productivity growth in this period. In reality, there is a potential for significant wage growth. However, only the small number of individuals has enjoyed economic gains. The fundamental economic challenge faced by business and the overall economy is the inability to make wages reach the high level of productivity, and, as a result, the American workers have demonstrated poor performance. Therefore, the main task that has been set by the policymakers is to raise wages, address income stagnation, address the issue of income inequality, and promote economic mobility in middle-class households. It is an essential step towards the elimination of family poverty. Unfortunately, the gradual recovery of the national economy has not brought significant wage gains over the last ten years. Despite the fact that the labor market has strengthened in recent years, it failed to provide millions of potential workers with a decent job, various benefits, opportunities, and generate real wage growth. Increased nominal wages, which were unadjusted for inflation, failed to address the inflationary pressure and address economic issues by increasing interest rates.

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High Cost of Attending Colleges

The laws of supply and demand have forced the competent authorities to increase tuition prices, and they have not decelerated in the course of time. In the distant past, colleges, schools, and universities helped to transform the elite into attorneys and doctors. In the modern times, the college has been democratized making the attendance mandatory for all individuals, who are ready to pay money for education. The equalization of educational opportunities improves the socioeconomic opportunities of the most vulnerable population (Freiman, 2016). However, the continuation of person’s high-school years is purposefully undertaken to help students gain power. In various marketplaces, including the stock market, no individual is ready to buy a homogeneous commodity at an increasing price. However, universities and colleges have convinced students and their parents that education, despite its costliness, is the fundamental factor that separates young people from lifelong poverty. However, there are many reasons for increasing prices in a college-level economics course. In order to take the course, students have to buy books offered by established publishers, professors, or any other third party, which covers purchase costs. However, the emergence of electronic textbooks has become available for rent and purchase online. The most profound trend in college attendance is the creation of for-profit schools. However, after years of expanding enrollments, applications have significantly declined. The college enrollment has reached its peak almost six years ago. Furthermore, one of the worst recessions has left millions of debt-burdened college graduates underemployed. As a result, many students and their families are concerned with a constant increase in tuition cost and with the perspectives in the near future. Moreover, the ongoing rise in cost has stretched the capacity of American families to pay for a college education to the breaking point. To fill the gap, millions of students and their families are annually forced to get into debt to compensate. Billions of dollars are borrowed through publicly-funded and private loan programs. From the cost perspective, educational establishments compete for students by attracting them to the top faculties, latest facilities and offer amenities for prospective applicants. In reality, budget cuts in funding for higher education and decreased subsidies at private schools have placed additional financial burden on the American families. Due to the great recession of 2008, no one could properly manage to bear increased costs despite the gradual recovery of stock market (Freiman, 2016). It is often argued that funding of post-secondary education has not been significantly reduced, but it does mean that schools get sufficient funds for own maintenance. Significant student attendance, more pay for professors, and college activity compared to business may enhance financial burden on educational establishments.

Conclusion

Immigration, a low increase in real wages for the past ten years, and a high cost of attending colleges are significant headwinds faced by not only business, but also by the national economy, and individuals; they have to be properly addressed to alleviate the burden and avoid dire consequences for every involved party. In general, effects of immigration on the U.S. economy and entrepreneurship are positive unless if it is legal. Illegal immigration and its economic effect on the U.S. business undermine the financial security of legal residents. For the past ten years, real wages have fallen, and the financial crisis of 2008 only has aggravated this socio-economic issue. Older adults and young people have suffered heavily. Unfortunately, nowadays, the overall economy is unable to reach the high level of productivity through wages due to the lack of financial stability. The supply and demand laws have forced the competent authorities to increase tuition prices, thereby placing an additional economic burden on the American families claiming that a degree is the only way to escape poverty.

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