Summary
Recently on the news, businesses from all over the place are firing their workers in attempt to save money. Black Box studio located in Vancouver recently became one of those businesses. Electronic Arts has confirmed that they are planning to reduce the workforce by 10 per cent or 1,000 people to save $120 million a year. Black Box studios employs more than 350 artists, engineers, designers and producers but by the end of March 31, upwards of 200 people are expected to lose their jobs. EA’s director of communications, Colin Macrae, states that the decision was about cost reduction and not related to the product. He also added that Vancouver is an expensive place to do business due to the competition for talent and the cost of real estate.
Connection
The Concept that links the article to the textbook would be Demand Deficient Unemployment. The reason why people are getting laid off is because of the lack of spending from the consumers. With this lack of consumer involvement in the economy, businesses are having difficulty selling their products. With sales going down, businesses will not need that much workers. Unemployment due to decreased sales is called Demand-deficient unemployment
Comment
I think that this is a serious problem, if this whole situation were to continue on, it will only result in countless of people losing their jobs. With more and more business letting employees off, it creates a disincentive for people to spend money. This creates a chain, due to the lack of spending from people, it forces businesses to lay off some employees, this will then cause an disincentive to spend money, which then comes back to lack of spending from people and it continues on until something happens that motivates people to spend money. Since Video games are considered a “Want” and not a “Need”, people will hesitate when deciding whether to buy it or not. The only solution I could think of is for the economy to recover, so that people aren’t afraid to spend money but until then we will be seeing a lot people getting laid off
Link:http://www.vancouversun.com/Business/announces+significant+layoffs+Vancouver+Black+studio/1207476/story.html
Comment @ Michael Li
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I agree with you that the people will hesitate about buying video games due to the fact that they are in fact a "want" and not a "need." I think that people need to spend their money on other goods such as food and clothes at a cheaper price. They don't really have the money for video games, nor do they have the time to play them. People would probably be trying to work more hours or just find a job in this current recession. To make matters worse, there is an inflation which makes them hesitate even more about buying video games. The people need to spend their money with even more caution now that the prices are higher. I understand EA's position right now, so I have to agree that the lay offs were the right thing to do or the EA company could be losing profit and would even end up bankrupt in the worse possible scenario.
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