The Course Of The Great Depression Essay Example For Students

The Course Of The Great Depression Essay The Asia turmoil begun in the middle of summer of 1997. The problem started in Thailand when Bath(known as Thaiscurencey) was geting weaker and weaker against US dollars. At that point, the rest of the world started to see that Thaiseconomy was starting to fall apart. Some pople predicted that the problem would not stay longer than a few months. However,it was wrong. As manner of fact, the problem spread amongs some of Asian Countries. Even the mighty Japan was effected bythis problem. United stated of America was also effected by this problem. That was a time that the US stock market was goingdown due to the fact that Many American cooporation invested in this some of Aisan countries. We will write a custom essay on The Course Of The Great Depression specifically for you for only $16.38 $13.9/page Order now Even today, the problem has not been fully recovered and who knows when. CauseThe main problem of the turmoil is the lack of management. Each countries has all similar problem. As we found out in ourresearch, we noticed that banking holds the main role and the key player to the turmoil. Many privates and Governmentbanking loaned too many credit for a big and similar project at the same time without checking the creditors solvency. Ofcourse among the creditor also, the money supposedly . And this is, of course, the second problem of the cause of the turmoil. Third, many creditors believe that their project will become successful without a proper preparation and planing. SolutionMalaysias National Economic Recovery Plan Causes of the Turmoil in the RegionIn todays world, large sums of money move across borders and provide more countries with access to international finance. The daily currency turnover in the foreign exchange market in 1995 is about US$1.2 trillion, compared with an average ofUS$190 billion a decade ago. The early 1990s saw the dramatic increase in the flows of private capital from the industrialcountries to the emerging countries. This was partly contributed by pension funds from the United States and Europe in searchfor higher returns overseas. The amount of private capital flowing into emerging markets was US$50 billion in 1990; the figurewas US$336 billion in 1996. With greater international capital flows, financial markets become more volatile as money movesacross borders with a mere keystroke of a computer. The unusual successful economic performance in the region attractedlarge inflows of foreign portfolio funds into the Asia Pacific region, which became a root cause for the currency crisis. Duringthe early to mid-1990s, China recorded growth rates between 9-14 per cent per annum, while Indonesia, Malaysia, andThailand experienced high annual growth rates that ranged between 7-12 per cent. Rapid growth rates were also recorded inSingapore, South Korea, and Taiwan. While there were sizeable current account deficits for some countries, especially for Malaysia and Thailand, these were theoutcome of the shortfalls of private savings to match private investment, not public sector dissaving. Foreign capital inflowsmade up for the shortfall in national savings to meet the very high national investment. While the net private inflows for Chinaand Vietnam were foreign, direct investment (FDI) dominated, short-term inflows were substantial for Indonesia, South Korea,Malaysia, and the Philippines. Thailand had a high level of short-term inflows of around 7-10 per cent of GDP. During1995-96, Malaysias short-term capital was 4-4.5 per cent of GDP, while its FDI was at 5 per cent of GDP. The decline in asset yields in the industrial economies prompted fund managers to invest into the Asian emerging assets, whichgave higher returns. The ASEAN countries suffered losses in competitiveness when the U.S. dollar, against which theircurrencies were closely linked, appreciated against the yen beginning in mid-1995. The rapid economic growth of theSoutheast Asian economies was accompanied by rapid credit growth to the private sector and asset price inflation, including inreal estate markets and in equity markets, rising the concern that their exchange rates were not sustainable. Weakness in the financial sector compounded the problem. The financial institutions in Thailand, Indonesia, and South Koreawere weakened by large-scale exposure to the property sector, high non-performing loans, and short-term loans that wereunhedged against currency movements. Inadequate disclosure of information and data deficiencies increased uncertainty andadversely affected confidence. There was also the lack of transparency in policy implementation. A brief explanation about IMFIMF is not a charitable institution, nor does it carry out its operations at taxpayers expense. It operates much like a creditunion. On joining the IMF, each member country subscribes a sum of money called its quota. Members normally pay 25percent of their quota subscriptions out of their foreign reserves, the rest in their national currencies. The quota is like a depositin the credit union, and the country continues to own it. The size of the quota determines the countrys voting rights, and theUnited States, with over 18 percent of the share, is the largest shareholder. Many essential issues require an 85 percentmajority, so that the United States effectively has a veto over major Fund decisions. When a member borrows from the Fund,it exchanges a certain amount of its own national currency for the use of an equivalent amount of currency of a country in astrong external position. The borrowing country pays interest at a floating market rate on the amount it has borrowed, while thecountry whose currency is being used receives interest. Since the interest received from the IMF is broadly in line with marketrates, the provision of financial resources to the Fund has involved little cost, to the creditor countries, including the UnitedStates. MF- Supported Programs in AsiaIMF-supported program to countries like Thailand, Indonesia and Korea have called for a substantial rise in interest rates toattempt to halt the downward spiral of currency depreciation. Over US$100 billion has been committed to the region under theIMF auspices since the crisis began. Conditions attached to the loans parallel those of the Latin America crisis of the 1980s. These programs have called for forceful, up-front action to put the financial system on a sounder footing as soon as possible. The fiscal programs vary from country to country. In each case, the IMF asked for a fiscal adjustment that would cover thecarrying costs of financial sector restructuringthe full cost of which is being spread over many yearsand to help restore asustainable balance of payments. In Thailand, this translated into an initial fiscal adjustment of 3 percent of GDP; in Korea, 11/2 percent of GDP; and in Indonesia, 1 percent of GDP, much of which will be achieved by reducing public investment inproject with low economic returns. .uad0a3d423cc01f0af0c9b7efffb0de2e , .uad0a3d423cc01f0af0c9b7efffb0de2e .postImageUrl , .uad0a3d423cc01f0af0c9b7efffb0de2e .centered-text-area { min-height: 80px; position: relative; } .uad0a3d423cc01f0af0c9b7efffb0de2e , .uad0a3d423cc01f0af0c9b7efffb0de2e:hover , .uad0a3d423cc01f0af0c9b7efffb0de2e:visited , .uad0a3d423cc01f0af0c9b7efffb0de2e:active { border:0!important; } .uad0a3d423cc01f0af0c9b7efffb0de2e .clearfix:after { content: ""; display: table; clear: both; } .uad0a3d423cc01f0af0c9b7efffb0de2e { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .uad0a3d423cc01f0af0c9b7efffb0de2e:active , .uad0a3d423cc01f0af0c9b7efffb0de2e:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .uad0a3d423cc01f0af0c9b7efffb0de2e .centered-text-area { width: 100%; position: relative ; } .uad0a3d423cc01f0af0c9b7efffb0de2e .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .uad0a3d423cc01f0af0c9b7efffb0de2e .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .uad0a3d423cc01f0af0c9b7efffb0de2e .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .uad0a3d423cc01f0af0c9b7efffb0de2e:hover .ctaButton { background-color: #34495E!important; } .uad0a3d423cc01f0af0c9b7efffb0de2e .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .uad0a3d423cc01f0af0c9b7efffb0de2e .uad0a3d423cc01f0af0c9b7efffb0de2e-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .uad0a3d423cc01f0af0c9b7efffb0de2e:after { content: ""; display: block; clear: both; } READ: An inquiry into ophelias madne EssayWorld Banks Agenda to Restructuring the East Asian EconomyThese are long-term issues and fixing the problems in these respective areas will take many years. Restructuring the industrialsector, changing the governance of the banking and the corporate sector and the relationship to the States, and adjusting theglobalization process to the level and capacities of the economy is not something than can done easily. Since the beginning of this crisis, about $110 billion have fled out the five major crisis countries Korea, Thailand, Indonesia,Malaysia, Philippines. This is about 10 per cent of the GDP of these countries. In addition to that, credits banking credits havealso been reduced by about $88 billion which is approximately another 8 per cent of the GDP. It means that about worth 18per cent of the GDP of these countries has just vanished in terms of funding of the economies. This withdrawal of funds has hadthe tremendous impact on the stock market and the exchange rate. Automatic corrections should come from the depreciationof the exchange rates and from the booming of exports. Japan is in recession and is extremely sensitive to the region. The totalamount of credits that the Japanese bank banking sector has allocated or distributed to the region is worth about 40 per cent ofits total, still in these five countries it is worth about 40 per cent of its capital. Given the vulnerability of t he economies it is amajor additional problem for the Japanese financial sector. Japan is exporting about 20 per cent is making about 20 per centof its exports in these countries, and the collapse of the economies there is impacting its performance. These countries aremaking between 15 and 25 per cent of their trade with Japan, and the recession in Japan is a major blow for all of them and isa major reason for this low demand that they are met with. In order to get out of the crisis, World Bank addressed the issue of clarifying the environment. One has to have a dynamicJapanese economy since Japan is an engine of growth in the region. The potential of the exports in Europe and in the US,provided these economies remain in an acceptable shape, or dynamic as is the case in the US, the potential for export cannotcompensate in the short run for the decline in the markets in the regional and Japanese markets. Another issue is within theregion itself within the countries. However, the ques tion is how to move an entire region up at the same time, given the fact thatthere is no possibility of success for an isolated country in such a depressing regional environment. There is no alternative tomore expansionary micro policies right now. Inflating the domestic demand is the only way in which we can break the viciouscircle of transmission of contagion from one country to the other. Another important thing is that there is room for major social programs in the region. These countries will not get through thecrisis without a very strong, very dynamic, very well thought social agenda. These agenda may be worth two, three, or fourpoints of GDP worth of public money. This is money, which is well invested and will pay off over the years especially as thesecountries have not right now social safety net they have developed. There is also a third use of the money, which is therecapitalization of the banking sector. Recapitalization by public funds of the banking sector makes sense only if in order tohave successful privatization process when the situation of the economy improves. IMF Bailout Rescuing the RichOxfam International Briefing, April 1998Oxfam International is concerned that IMF programs have been designed primarily with a view to bailing out recklessinternational investors, whose activities have contributed to the present crisis. The implication of the poor has been leftunconsidered. There is clear evidence of increasing poverty and hardship among the vulnerable communities, which Oxfamworks. There is now a real danger that a combination of deflationary policies and cuts in social sector funding will erode thesignificant advances made in poverty reduction over recent decades. In Indonesia, Oxfam estimates that the number of people living below the poverty line could quadruple over the next 6 monthsto affect 40 per cent of the population- the same incidence as in 1977. The number of people living in poverty will rise from 23million to 100 million this year, with devastating implications for human welfare and social stability. Long-standing developmentproblems in Indonesia such as high maternal mortality rate, lack of access to safe water for 80 million people, wideningdisparities in income- are bound to worsen. Recent field visits from Oxfam staff already point to distressing expansion ofpoverty in Indonesia, because of economic crisis and a prolonged draught. There are huge number of people out of work, asharp rise in the price of essential food and non-food items, the breakdown of the distribution of basic goods and services andthe increasing violations of human rights. In West Timor, 75 per cent of families are eating one meal a day that often includesA putak, @ the bark of a tree normally used as cattle feed. Million of Indonesian households can no longer afford basic care, tosend their children to school, or to buy enough food. Many are meeting immediate needs by selling assets, thus risking plungingfurther into poverty as the crisis continues. In Thailand, a recent World Bank report highlights the impact on the poor increased unemployment; price rises in basicfoodstuffs and cuts in basic services. In particular, the report emphasizes the impact of the crises on children. As family incomesfall, growing numbers have been forced to work, beg or enter prostitution. School drop out rates has risen and some familiescan no longer affords education or transport. In Thailand, unemployment is expected to rise to 1.7 million in the coming year. IMF insufficient attention has been paid to the specific circumstance of East Asia. Conditions attached to the loans parallelthose of the Latin America crises of the 1980s, demands massive deflation, with cuts in public spending and high interest ratesas the main policy instruments. The bias towards deflation and fiscal austerity is not only inappropriate, given the underlyingeconomic conditions, but threatens to turn recession into a full blown depression, with its attendant problems in terms of massunemployment and rising poverty. Monetary and fiscal policy has been tightened to the point of strangulation, threatening to killor disable the patient during the first phase of treatment. For instance in South Korea, the IMF wants to see interest ratesdoubled to more than 15 per cent. This will inevitable lead to the early collapse of many companies, resulting in a loss ofproduction and employment opportunities. Intense fiscal pressure are also being applied to Thailand, where public spending isto be reduced by the equivalent of 3 per cent of GDP. In Indonesia, public spending is scheduled to fall by around 10 per cent. .ufb31d4de988c38cdf022d54f6cb6a9e0 , .ufb31d4de988c38cdf022d54f6cb6a9e0 .postImageUrl , .ufb31d4de988c38cdf022d54f6cb6a9e0 .centered-text-area { min-height: 80px; position: relative; } .ufb31d4de988c38cdf022d54f6cb6a9e0 , .ufb31d4de988c38cdf022d54f6cb6a9e0:hover , .ufb31d4de988c38cdf022d54f6cb6a9e0:visited , .ufb31d4de988c38cdf022d54f6cb6a9e0:active { border:0!important; } .ufb31d4de988c38cdf022d54f6cb6a9e0 .clearfix:after { content: ""; display: table; clear: both; } .ufb31d4de988c38cdf022d54f6cb6a9e0 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .ufb31d4de988c38cdf022d54f6cb6a9e0:active , .ufb31d4de988c38cdf022d54f6cb6a9e0:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .ufb31d4de988c38cdf022d54f6cb6a9e0 .centered-text-area { width: 100%; position: relative ; } .ufb31d4de988c38cdf022d54f6cb6a9e0 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .ufb31d4de988c38cdf022d54f6cb6a9e0 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .ufb31d4de988c38cdf022d54f6cb6a9e0 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .ufb31d4de988c38cdf022d54f6cb6a9e0:hover .ctaButton { background-color: #34495E!important; } .ufb31d4de988c38cdf022d54f6cb6a9e0 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .ufb31d4de988c38cdf022d54f6cb6a9e0 .ufb31d4de988c38cdf022d54f6cb6a9e0-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .ufb31d4de988c38cdf022d54f6cb6a9e0:after { content: ""; display: block; clear: both; } READ: Travel Essay - Trip to the BahamasAccording to Indonesian Government sources, as many as 1.6 million primary and junior secondary school students may beforced to withdraw from school. In real terms, government budgets for health and education have fallen dramatically. Reduction in public spending could act as a further driving force for poverty, reducing basic services to the poor at preciselythe time when the need for them is increasing. The immediate consequences will be registered in the form of reducedopportunities for education and health. In the longer term, public spending cuts could sever the link, which has been establishbetween growth and equity, to the detriment of both. For instance, Thailands economic problems are related to a deepeningskill shortage in sectors vital for the transition to a more diverse and technologically sophisticated economy. Deterioratingeducational performance will undermine prospects for such a transition. ConclusionBased on the analysis given by various sources that we gathered, we conclude that the root cause of the currency crisis inSouth East Asia is due to large inflows in the form of credits and portfolio investment as well as capital through multinationalcorporations, largely came from investors in the Un ited States and Western Europe. The unusual successful economicperformance in the region attracted these inflows into the region. Most of our sources stated that, while these inflows hadpermitted faster growth, they had allowed domestic banks to expand lending rapidly, fueling imprudent investments andunrealistic increases in asset prices. According to Jeff Sachs, the Director of the Harvard Institute for InternationalDevelopment, Thailand, in 1997, overvaluation of the real exchange rate, coupled with booming bank lending, heavily directedat real estate. The overvaluation tended to push new investment towards non-tradable sectors-notably construction awayfrom the tradable sectors that are necessary to provide the wherewithal for future servicing of foreign debts. Several sourcesmentioned that most economies pegged their currencies to the dollar in recent years, even though their trade with theadvance countries was roughly equally divided between the US, Europe and Japan. When the dollar appreciated sharplyagainst the yen and the European currencies after 1995, emerging-markets currencies were pulledalong in its wake made their exports less competitive. Another source, IMF, stated that the key domestic factors that led to theeconomic crisis appeared to have been: First, the failure to dampen overheating pressurethat had become increasingly evident in Thailand and many other countries in the region and were manifested in large externaldeficits and property and stock market bubbles; second, the maintenance of pegged exchange rate regimes for too long, whichencourage external borrowing and led to excessive exposure to foreign risk in both the financial and corporatesectors; and third, according to them, lax prudential rules and financial oversight, which led to a sharp deterioration in thequality of banks loan portfolios. IMF further stated that political uncertainties and doubt about the authorities commitment and ability to implement thenecessary adjustment an d reforms exacerbated pressures on currencies and stock markets. They also blamed the emergingcountries reluctance to tighten monetary conditions and to close insolvent financial institutions as an addition to the turbulence inthe financial markets. Countries like Thailand and Indonesia turned to IMF, the World Bank and other countries for financialassistance but insufficient attention, especially by IMF hasbeen paid to the specific circumstances of East Asia. Their programs have been designed primarily with a view to bailing outreckless international investors and implication of the poor has been left unconsidered. The bias towards deflation and fiscalausterity is not only inappropriate, but also threatens to turn recession into full-blown depression. IMF appliedintense fiscal pressure to those countries such as Thailand and Indonesia where public spending was to be reduced by theequivalent 3 per cent of GDP and 10 per cent of GDP consecutively. Reduction in public spending,for exa mple, was in the form of reduced opportunities for education and health. In Indonesia, for example, according toIndonesia Government source, as many as 1.6 million primary and junior secondary school students may be forced towithdraw from school. George Soros, in his testimony to the U.S. House of Representatives on September 15, 1998, IMF imposed tough conditionson the country concerned but did not imposed tough penalties on the lenders and the treatment on on lenders and borrowersneeded to to be corrected. Chairman Alan Greenspan, in his testimonies before the Committee on Banking and Financial Services, U.S. House ofRepresentatives on November 13, 1997, stated that the recent crises would arguably have been better contained iflong-maturities properties loans had not accentuated the usual mismatch between maturities of assets and liabilities of domesticfinancial systems that were far from robust to begin with. Greenspan advised economic policy makers in Asia to fend offdomestic pr esures that seek disengagement from the world trading and financial system.

Critically Evaluation Of The View That During Times Of Recession And Economic Downturn, Employee Commitment Can Be Assured With A Steady Income The WritePass Journal

Critically Evaluation Of The View That During Times Of Recession And Economic Downturn, Employee Commitment Can Be Assured With A Steady Income Introduction Critically Evaluation Of The View That During Times Of Recession And Economic Downturn, Employee Commitment Can Be Assured With A Steady Income ). Whilst these strategies may be employed, our in interest in this paper is critically evaluating whether employee commitment can be assured with a steady income during such times of recession and economic downturn. A large number of studies have pointed out to the adverse impacts of cost cut measures that include pay cuts. According a Right Management Survey (2010) conducted on North American workers, 60% of the 900 respondents surveyed indicated their intent to leave their current employer as soon as there was an improvement and recovery of the economy. Similar conclusions have been reached upon by subsequent studies across the globe. A recent ORC International research on Australian companies showed a significant decline in employee engagement, with Australian organizations lagging behind other industrialized countries in employee engagement levels (Conrad 2012). The importance of maintaining a stable income to ensure a committed and motivated workforce is further evident in Britain where research has painted a worrying picture of a standstill Britain. In the UK, the level of employee engagement dropped significantly during the recession. According to a quarterly Employee Outlook survey report (2010), employee engagement levels reached an all-time low in the UK, with job satisfaction falling to 35 in 2010, down from 48. These findings have been confirmed by another Global Workforce Study (GWS) by Towers Watson which surveyed 2,628 workers in the UK. The study found 26% of the workers feeling stuck in their role, 40% wanting to leave their current jobs, and a vast majority of 77% arguing that their ability to adva nce their careers had worsened (Towers Watson, 2012). Adding to these concerns, only a third of the workers surveyed thought of their organization as providing good pay and opportunities for career development. Worryingly, 66% felt that there was no clear link between performance and pay, indicating the lack of incentive for motivating the workers (Towers Watson 2012). As pointed out by Yves Duhaldeborde, the head of surveys at Towers Watson, the research paints a worrying picture as workers and businesses reach a standstill with creativity and ambition taking a back seat. The post recession reality is that many of the workers have hit ambition ceiling and are choosing a steady income over creativity and career advancement. Several other studies have shown pay to be the most effective motivator. In their meta-analysis, Locke et al (1980) concluded that money was the most crucial incentive and effective motivator than other incentives. This finding has received support from subsequent researches. However, research on this topic has produced mixed results. Studies arguing against stable income as an effective motivator Contrary to the popular view, some studies have shown that pay is not necessarily an essential motivator. For example, in a survey by Towers Perrin (2005) which identified some of the top ten motivational factors, pay was not listed among the list. Among the top five motivators identified by the survey were: managers interest in the well being of its workforce, challenging work, customer focus and decision-making authority (Rynes et al. 2004). moreover, whilst a large number of studies have shown that recession impacted negatively on employee engagement with most of the workforce worried about layoffs and decreases in their income, new research from Gallup has shown that the fear may not have been as dramatic as publicly pronounced. The Gallup study found that, despite the intense recessionary pressures, employee engagement stayed fairly even and that employees remain confident of a trusting environment during this period (Cabtree 2011). Further, a similar study by Kelly International (2010) found that, contrary to the popular view, employee loyalty increased during the recession period with 52% of the North American work force remaining totally committed to their company. Most of these respondents argued that recession itself were responsible for heightening their loyalty. With the market slowly rebounding, businesses are on track to increase the salaries of their employees in order to retain their top talent. Although the prime focuses of engagement efforts seem to be based on financial rewards, it is not always the case that employee commitment can be assured with a steady income. Most of the organizations today still do not understand how to effectively engage their employees. As reported in a 2009 work survey by Deloitte Company, employees of today value meaningful work, more open communication and connection to the organization more than high salaries. Employees who feel valued and connected to their organization are far more likely to remain actively engaged than slightly higher-paid employees. Whereas the income effect has an impact on employee engagement, its effect tends to wear off over months of discontent. This is further evident in a recent employee engagement survey conducted by WorldatWork in collaboration with the Hay Group and Loyola University Chicago. The survey found a weak relationship between base pay and employee engagement and commitment; compared to intangible rewards, incentives and leadership quality. The study concluded that non-financial rewards had a greater impact on employee engagement compared to financial rewards. Nonetheless, voluminous evidence obtained from several hundreds of studies have found a strong positive correlation between the two. Hence, it can be inferred that during times of recession and economic downturn, employee commitment can be assured with a stable income. Whereas pay on its own may not be sufficient in effectively engaging employees, assuring employees about stability of their income would support the emotional commitment of the workforce. Conclusion Many businesses have often succumbed to the pressures of maintaining the workforce amidst diminishing revenues especially when under intense recessionary pressure. Most companies have often ignored the critical need to ensure that cost cuts are done in ways that support the emotional commitment of the workforce. Such cost cutting measures certainly impact negatively on the workforce, often leading to decreased levels of employee engagement and loss of top talents. Businesses have to take a strategic approach to employee relations in order to retain their top talent and emerge as winners of the talent wars. Cost reduction should thus be done in ways that reinforces company culture and integrates emotional commitment of the workforce with the business imperatives. Before implementing any cost reduction strategies, executives have consider whether such strategies would damage their value proposition to employees, thereby affecting their motivation and commitment which eventually results in disengaged employees. Although some studies have shown that pay is not necessarily an essential motivator and that employees tend to value meaningful work, more open communication and connection to the organization more than high salaries, voluminous evidence obtained from several hundreds of studies have found a strong positive correlation between the two. Based on this analysis, we conclude that maintaining a stable income during such hard times of recession and economic downturn would certainly help to keep engagement levels relatively high. Reference Aon Hewitt, 2013. 2013 Trends in global employee engagement. [viewed on 17th October 2013} available from www.onhewitt.com Aon Hewitt, 2010. 2010 employee engagement survey. Aon Hewitt Firm Bewley, T.F., 1998. why not cut pay? European Economic Review 42, pp.459 490 Bromfield, P., 2008. Energizing employees in recessionary times try motivating, not mandating. Booz Company Cataldo, P., 2011. Focusing on employee engagement: how to measure it and improve it. UNC Executive Development Chartered Institute of Personnel and Development (CIPD), 2006. How engaged are British employees. London: CIPD. Conrad, S., 2012. Driving employee engagement post-recession: best practices for Australian companies. [viewed on 14th October} available from http://blog.halogensoftware.com/driving-employee-engagement-post-recession-best-practices-for-australian-companies Crabtree, S., 2011. The recessions impact on US employees. Gallup Business Journal Harter, J. K., Schmidt, F.L., Hayes, T.L., 2002. Business-Unit Level Relationship Between Employee Satisfaction, Employee Engagement and Business Outcomes: a Meta Analysis. Journal of Applied Psychology. 86(2): 286-279. Hay Group, 2010.The loyalty deficit: the impact of recession on engagement. Hay Group Kelly International, 2010. Employee loyalty rises during global economic recession. [viewed on 18th October 2013} available from http://ir.kellyservices.com/releasedetail.cfm?ReleaseID=450036 Kumar, P. and Swetha, G., 2011. A prognostic examination of employee engagement from its historical roots. International Journal of Trade, Economics and Finance, vol.2 (3) pp.232-238 Locke, E.A., Ferren, D.B., McCaleb, V.M., Shaw, K.N. and Denny, A.T., 1980. The relative effectiveness of four methods of motivating employee performance. In: Duncan, K.D., Gruenberg, M.M. Wallis (Eds), changes in working life, New York: Wiley publishers. Macey, W.H and B. Schneider. 2008. The Meaning of Employee Engagement. Industrial and Organizational Psychology. 1: 3-30. Maslow, A.H., 1943. A theory of human motivation. Psychological Review, 50, pp.370-396 Peacock, L., 2010. Recession over but employee engagement hits all-time low, CIPD warns. [Viewed on 14th October 2013] available from personneltoday.com/articles/26/01/2010/53802/recession-over-but-employee-engagement-hits-all-time-low-cipd-warns.htm Quantum workplace report, 2012. Employee engagement trends report. Quantum Workplace Quarterly Survey report, 2010. Employee outlook: emerging from the downturn? CIPD Reem, Y., 2011. Motivating public sector employees. Working papers no. 60 Rehan, M.F. and Islam, T., 2013. Relationship between organizational commitment and citizenship behaviours. World Journal of Management and Behavioural studies 1 (1), pp.24-32 Schroeder-Saulnier, D., 2010. Reengaging Employees in a Post-Recession World, Best Practices in HR, Robinson, D., S. P. Perryman and S. Hayday. (2004). The Drivers of Employee Engagement. IES Report 408. {Viewed on 16th October 2013} Retrieved from employment-studies.co.uk/summary/ Roche, W.K., Teague, P., Coughlan, A., Fahy, M., 2006. Human resources in the recession: managing and representing people at work in Ireland. Oxford: Routledge Rousseau, D. M. and Tijoriwala, S. A., 1998. Assessing psychological contracts: Issues, alternatives, and measures. Journal of Organizational Behavior, 19, 679-695 Rynes, S.L., Gerhart, B., Minette, K.A., 2004. The importance of pay in employee motivation: discrepancies between what people say and what they do. Human Resource Management, vol.43, pp.381-394 Schneider, B., W.H. Macey, K.M. Barbera and N. Martin. 2009. Driving Customer Satisfaction and Financial Success through Employee Engagement. People and Strategy. 32(2): 22-27 Scott, D., McMullen, T., Royal, M. and Stark, M., 2010. The impact of rewards programs on employee engagement. WorldatWork Tesvich, L.K. And Morrow, C., 2010. HRs challenge: engaging employees post-recession. The Linkage Leader. LKT Consulting, Inc. and Sage Assessments. Tower Watson, 2012. Global study warns of standstill Britain as workers and businesses hit ambition ceiling. {viewed on 14th October 2013} available from towerswatson.com/en-GB/Press/2012/07/global-study-warns-of-standstill-britain-as-workers-and-businesses-hit-ambition-ceiling TOWERS PERRIN, 2005. Reconnecting with employees: quantifying the value of engaging your workforce. London: Towers Perrin Towers Perrin, 2009. closing the engagement gap: a road map for driving superior business performance: Tower Perrin Global Workforce Study 2007-2008 Towers Watson, 2012. Global workforce study: engagement at risk: driving strong performance in a volatile global environment. Wellins, R.S., Bernthal, P., Phelps, M., 2007. Employee engagement: the key to realizing competitive advantage. Development Dimensions International, Inc. Truss, C., Soane, E., Edwards, C., Wisdom, K., Croll, A. and Burnett, J. (2006) Working Life: Employee Attitudes and Engagement 2006. London, CIPD. Critically Evaluation Of The View That During Times Of Recession And Economic Downturn, Employee Commitment Can Be Assured With A Steady Income Introduction Critically Evaluation Of The View That During Times Of Recession And Economic Downturn, Employee Commitment Can Be Assured With A Steady Income ). Whilst these strategies may be employed, our in interest in this paper is critically evaluating whether employee commitment can be assured with a steady income during such times of recession and economic downturn. A large number of studies have pointed out to the adverse impacts of cost cut measures that include pay cuts. According a Right Management Survey (2010) conducted on North American workers, 60% of the 900 respondents surveyed indicated their intent to leave their current employer as soon as there was an improvement and recovery of the economy. Similar conclusions have been reached upon by subsequent studies across the globe. A recent ORC International research on Australian companies showed a significant decline in employee engagement, with Australian organizations lagging behind other industrialized countries in employee engagement levels (Conrad 2012). The importance of maintaining a stable income to ensure a committed and motivated workforce is further evident in Britain where research has painted a worrying picture of a standstill Britain. In the UK, the level of employee engagement dropped significantly during the recession. According to a quarterly Employee Outlook survey report (2010), employee engagement levels reached an all-time low in the UK, with job satisfaction falling to 35 in 2010, down from 48. These findings have been confirmed by another Global Workforce Study (GWS) by Towers Watson which surveyed 2,628 workers in the UK. The study found 26% of the workers feeling stuck in their role, 40% wanting to leave their current jobs, and a vast majority of 77% arguing that their ability to adva nce their careers had worsened (Towers Watson, 2012). Adding to these concerns, only a third of the workers surveyed thought of their organization as providing good pay and opportunities for career development. Worryingly, 66% felt that there was no clear link between performance and pay, indicating the lack of incentive for motivating the workers (Towers Watson 2012). As pointed out by Yves Duhaldeborde, the head of surveys at Towers Watson, the research paints a worrying picture as workers and businesses reach a standstill with creativity and ambition taking a back seat. The post recession reality is that many of the workers have hit ambition ceiling and are choosing a steady income over creativity and career advancement. Several other studies have shown pay to be the most effective motivator. In their meta-analysis, Locke et al (1980) concluded that money was the most crucial incentive and effective motivator than other incentives. This finding has received support from subsequent researches. However, research on this topic has produced mixed results. Studies arguing against stable income as an effective motivator Contrary to the popular view, some studies have shown that pay is not necessarily an essential motivator. For example, in a survey by Towers Perrin (2005) which identified some of the top ten motivational factors, pay was not listed among the list. Among the top five motivators identified by the survey were: managers interest in the well being of its workforce, challenging work, customer focus and decision-making authority (Rynes et al. 2004). moreover, whilst a large number of studies have shown that recession impacted negatively on employee engagement with most of the workforce worried about layoffs and decreases in their income, new research from Gallup has shown that the fear may not have been as dramatic as publicly pronounced. The Gallup study found that, despite the intense recessionary pressures, employee engagement stayed fairly even and that employees remain confident of a trusting environment during this period (Cabtree 2011). Further, a similar study by Kelly International (2010) found that, contrary to the popular view, employee loyalty increased during the recession period with 52% of the North American work force remaining totally committed to their company. Most of these respondents argued that recession itself were responsible for heightening their loyalty. With the market slowly rebounding, businesses are on track to increase the salaries of their employees in order to retain their top talent. Although the prime focuses of engagement efforts seem to be based on financial rewards, it is not always the case that employee commitment can be assured with a steady income. Most of the organizations today still do not understand how to effectively engage their employees. As reported in a 2009 work survey by Deloitte Company, employees of today value meaningful work, more open communication and connection to the organization more than high salaries. Employees who feel valued and connected to their organization are far more likely to remain actively engaged than slightly higher-paid employees. Whereas the income effect has an impact on employee engagement, its effect tends to wear off over months of discontent. This is further evident in a recent employee engagement survey conducted by WorldatWork in collaboration with the Hay Group and Loyola University Chicago. The survey found a weak relationship between base pay and employee engagement and commitment; compared to intangible rewards, incentives and leadership quality. The study concluded that non-financial rewards had a greater impact on employee engagement compared to financial rewards. Nonetheless, voluminous evidence obtained from several hundreds of studies have found a strong positive correlation between the two. Hence, it can be inferred that during times of recession and economic downturn, employee commitment can be assured with a stable income. Whereas pay on its own may not be sufficient in effectively engaging employees, assuring employees about stability of their income would support the emotional commitment of the workforce. Conclusion Many businesses have often succumbed to the pressures of maintaining the workforce amidst diminishing revenues especially when under intense recessionary pressure. Most companies have often ignored the critical need to ensure that cost cuts are done in ways that support the emotional commitment of the workforce. Such cost cutting measures certainly impact negatively on the workforce, often leading to decreased levels of employee engagement and loss of top talents. Businesses have to take a strategic approach to employee relations in order to retain their top talent and emerge as winners of the talent wars. Cost reduction should thus be done in ways that reinforces company culture and integrates emotional commitment of the workforce with the business imperatives. Before implementing any cost reduction strategies, executives have consider whether such strategies would damage their value proposition to employees, thereby affecting their motivation and commitment which eventually results in disengaged employees. Although some studies have shown that pay is not necessarily an essential motivator and that employees tend to value meaningful work, more open communication and connection to the organization more than high salaries, voluminous evidence obtained from several hundreds of studies have found a strong positive correlation between the two. Based on this analysis, we conclude that maintaining a stable income during such hard times of recession and economic downturn would certainly help to keep engagement levels relatively high. Reference Aon Hewitt, 2013. 2013 Trends in global employee engagement. [viewed on 17th October 2013} available from www.onhewitt.com Aon Hewitt, 2010. 2010 employee engagement survey. Aon Hewitt Firm Bewley, T.F., 1998. why not cut pay? European Economic Review 42, pp.459 490 Bromfield, P., 2008. Energizing employees in recessionary times try motivating, not mandating. Booz Company Cataldo, P., 2011. Focusing on employee engagement: how to measure it and improve it. UNC Executive Development Chartered Institute of Personnel and Development (CIPD), 2006. How engaged are British employees. London: CIPD. Conrad, S., 2012. Driving employee engagement post-recession: best practices for Australian companies. [viewed on 14th October} available from http://blog.halogensoftware.com/driving-employee-engagement-post-recession-best-practices-for-australian-companies Crabtree, S., 2011. The recessions impact on US employees. Gallup Business Journal Harter, J. K., Schmidt, F.L., Hayes, T.L., 2002. Business-Unit Level Relationship Between Employee Satisfaction, Employee Engagement and Business Outcomes: a Meta Analysis. Journal of Applied Psychology. 86(2): 286-279. Hay Group, 2010.The loyalty deficit: the impact of recession on engagement. Hay Group Kelly International, 2010. Employee loyalty rises during global economic recession. [viewed on 18th October 2013} available from http://ir.kellyservices.com/releasedetail.cfm?ReleaseID=450036 Kumar, P. and Swetha, G., 2011. A prognostic examination of employee engagement from its historical roots. International Journal of Trade, Economics and Finance, vol.2 (3) pp.232-238 Locke, E.A., Ferren, D.B., McCaleb, V.M., Shaw, K.N. and Denny, A.T., 1980. The relative effectiveness of four methods of motivating employee performance. In: Duncan, K.D., Gruenberg, M.M. Wallis (Eds), changes in working life, New York: Wiley publishers. Macey, W.H and B. Schneider. 2008. The Meaning of Employee Engagement. Industrial and Organizational Psychology. 1: 3-30. Maslow, A.H., 1943. A theory of human motivation. Psychological Review, 50, pp.370-396 Peacock, L., 2010. Recession over but employee engagement hits all-time low, CIPD warns. [Viewed on 14th October 2013] available from personneltoday.com/articles/26/01/2010/53802/recession-over-but-employee-engagement-hits-all-time-low-cipd-warns.htm Quantum workplace report, 2012. Employee engagement trends report. Quantum Workplace Quarterly Survey report, 2010. Employee outlook: emerging from the downturn? CIPD Reem, Y., 2011. Motivating public sector employees. Working papers no. 60 Rehan, M.F. and Islam, T., 2013. Relationship between organizational commitment and citizenship behaviours. World Journal of Management and Behavioural studies 1 (1), pp.24-32 Schroeder-Saulnier, D., 2010. Reengaging Employees in a Post-Recession World, Best Practices in HR, Robinson, D., S. P. Perryman and S. Hayday. (2004). The Drivers of Employee Engagement. IES Report 408. {Viewed on 16th October 2013} Retrieved from employment-studies.co.uk/summary/ Roche, W.K., Teague, P., Coughlan, A., Fahy, M., 2006. Human resources in the recession: managing and representing people at work in Ireland. Oxford: Routledge Rousseau, D. M. and Tijoriwala, S. A., 1998. Assessing psychological contracts: Issues, alternatives, and measures. Journal of Organizational Behavior, 19, 679-695 Rynes, S.L., Gerhart, B., Minette, K.A., 2004. The importance of pay in employee motivation: discrepancies between what people say and what they do. Human Resource Management, vol.43, pp.381-394 Schneider, B., W.H. Macey, K.M. Barbera and N. Martin. 2009. Driving Customer Satisfaction and Financial Success through Employee Engagement. People and Strategy. 32(2): 22-27 Scott, D., McMullen, T., Royal, M. and Stark, M., 2010. The impact of rewards programs on employee engagement. WorldatWork Tesvich, L.K. And Morrow, C., 2010. HRs challenge: engaging employees post-recession. The Linkage Leader. LKT Consulting, Inc. and Sage Assessments. Tower Watson, 2012. Global study warns of standstill Britain as workers and businesses hit ambition ceiling. {viewed on 14th October 2013} available from towerswatson.com/en-GB/Press/2012/07/global-study-warns-of-standstill-britain-as-workers-and-businesses-hit-ambition-ceiling TOWERS PERRIN, 2005. Reconnecting with employees: quantifying the value of engaging your workforce. London: Towers Perrin Towers Perrin, 2009. closing the engagement gap: a road map for driving superior business performance: Tower Perrin Global Workforce Study 2007-2008 Towers Watson, 2012. Global workforce study: engagement at risk: driving strong performance in a volatile global environment. Wellins, R.S., Bernthal, P., Phelps, M., 2007. Employee engagement: the key to realizing competitive advantage. Development Dimensions International, Inc. Truss, C., Soane, E., Edwards, C., Wisdom, K., Croll, A. and Burnett, J. (2006) Working Life: Employee Attitudes and Engagement 2006. London, CIPD.