Is Race For Bottom Exists Or Not?

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Introduction:
The issue whether race to bottom exists or not has been an interesting point of discussion and research for various economists from a long time.
The term race to bottom means, “the situation in which companies and countries try to compete with each other by cutting wages and living standards for workers, and the production of goods is moved to the place where the wages are lowest and the workers have the fewest rights.”
The term clearly emphasis on the concept of lowering standards in all aspects to lower the cost and increase profit. From the companies point of view it seems attractive, whereas reality seems to be different than definitions.
The major focus of the essay would be to verify whether the reasons considered
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Thus it basically relies on the concept of FDI and the reason for FDI entering the developing countries.
To understand the level prevalence of these intentions we need to focus on what all circumstances brings FDI beside the lower standards.
Factors attracting MNC’s:
The major contributor to the manufacturing industry is the labour force. The availability of proper labour force adds to the production amount of any organisation. Hence the MNC’s would look forward for the countries with bigger labour force to enhance their production.
In addition to availability of huge and efficient labour force. The wages also prove to be the biggest attracter. Due to higher wage rate of developed countries than to developing countries MNC’s find it preferable to shift to developing countries with lower wage rates. But it doesn’t prove that the wages are lowered in the host country by MNC or by the government to attract MNC.
For example: China has the highest manufacturing workforce which can prove beneficial for any MNC to shift their manufacturing department in China.
And China has left USA behind in manufacturing units.
Another component that decides the profit rate is the cost of raw materials/resources and the transportation cost.Due to globalisation all the manufacturing plants have a huge supply chain for their raw materials that they receive from countries where they are less costly. But many a timesresource seeking MNC’s prefer to move their plants
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