The Effects of Cheap Labor on High Wage Countries; Does Cheap Labor Have an Adverse Effect on Other Countries

It’s important to have labor restrictions and eliminate unfavorable wages and poor working conditions in the developed importing countries. The low labor cost in developing countries is the result of poorly

Labor is an important service that must be available and balanced in an ever growing population. For example, there cannot be a larger number of residents than there is labor or else there will be a definite increase in poverty. In the United States, there is a set law of minimum wage, which has an effect on companies and how they manage their labor force. The increase of the minimum wages affects the overall distribution of hours available, therefore, hurting the amount of labor needed. Conversely, minimum wage also has a major effect on those who recetly entered the workforce. If the minimum wage rises, there will be an increase of the unemployment rate. Correspondley, as the unemployed suffer, the first to be affected will be incoming laborers who are looking for jobs and work experience which is essential for their future. However, the upside of increasing minimum wage is that for those employed who keep their jobs they will earn more income which may increase the

In the third world countries such as Vietnam, China, South Korea and Taiwan, we are provided with an example of cheap labour. These corporations could now achieve the benefit of the United States consumer market8, while keeping their costs extremely low in offshore production. The working conditions in the United States were poor for centuries, often little to nothing was done unless a tragedy occurred to influence worker rights by the public. This was the issue during the Industrial Revolution and in the late 20th century. In the United states, improvements have been made and these conditions have disappeared, with the privilege in some agricultural areas. Companies from the United States have moved a considerable amount of their factories

The article written by Peter Callero is based on the idea that globalization is involved in our everyday lives. The author relates this topic to how jobs are made in the United States or when their moved into another country. It refers to the effects of this move and how it changes the incomes of workers in our country.

A reporter entered Bangkok, Thailand and interviewed the father of a girl who worked in a sweatshop. He said, ''I hope she can keep that job. There's all this talk about factories closing now, and she said there are rumors that her factory might close. I hope that doesn't happen. I don't know what she would do then.'' This man’s daughter was making 2 dollars a day. The man went on to say that most people want jobs like his daughter has, because they pay higher and let you work longer hours than most other available jobs (Wudunn). While people here in the states protest outsourcing to these sweatshops, those working in them are grateful for the jobs they have. Their economies grow because of the additional companies in the workforce, and the United States economy grows as

As many laborers with a minimal skills lose jobs, the market loses a household with income that is disposable, which in turn leads to fewer consumers in the market. This can be extremely detrimental to many economies as when fewer, and fewer households can spend income freely the market that those households are a part of begins to thrives less. As a study by the U.S. Census Department shows as many multinational companies outsourced over 2.4 million jobs, and cut 2.9 million domestically (washington post, pg.1). The dramatic impact that this has on the consumer as well as the market is devastating. Moreover, outsourcing of the jobs offered to the middle class, which is the main market of consumers in many first world countries. This fact is alarming as corporations who don’t turn a profit can’t trickle down jobs, creating a self sustaining system where a corporation will begin to outsource more jobs to keep costs low and prices attractive to the average consumer. By killing domestic jobs corporations are ,marginalizing their profits which in turn will give them less money to hire potential employees and help their job market

Unlike the United States 7.25/hr minimum wage, Mexico’s minimum wage is set at just few dollars per day. Careless of the American working class, large corporations closed factories in the US and moved them south of the border to Mexico where they could pay workers a minimum wage and not have to conform to regulations. Since Mexico was added, the US manufacturing sector has outsourced five million jobs (Blecker). Many of these workers did not have a backup plan or funds to support them after they lost their job therefore they fell into extreme poverty. Sadly, these workers could not provide for their families and struggled to survive. Not only did NAFTA ruin the US manufacturing job market, the trade deficit between the USA and Mexico grew exponentially and now sits at an unfathomable amount. The deficit took a turn for the worse due to NAFTA, the United states had a 1.7 billion dollar surplus in 1993 (prior to Mexico’s addition), to a 54 billion dollar deficit by 2014 (Mcbride). Clearly, the United States lost a significant amount of currency due to NAFTA. Although the US is commonly on the losing side of trade deals, NAFTA is by far the most detrimental to the

In the past 20 years’ income inequality has become a major issue in particular within the United States (US) where a significant income gap has occurred. This is exemplified by the US Gini index (GI), a measure of income inequality, which has risen from 43 in 1990 to around 47 in 2010 and is continuing to trend upward (David Moss, 2011). This has now become a problem that both develop and developing nations face. The main causes being globalization and technology. In developed countries globalization has increased cheap foreign imports with technology making importing extremely cost efficient. There’s also the outsourcing or the replacement of low skill jobs with newer technology. These two processes have contributed to higher profits for executives while low skill workers are losing their jobs by the thousands. In developing countries globalization has led to low skill workers having to compete in cheap labor markets dropping their wages even further. Technology in these developing countries has also increased income inequality with their lower class unable even be literate enough to learn newer technology. Therefore, inequality damages economies and workforces on a world scale

Author Thomas L. Friedman analyses the technological advances that are creating a level economic playing field with previously disadvantaged countries rising in knowledge and wealth rivaling that of the United States and other world powers in the world. Telephone and computer technology, previously a stronghold only of developed countries, is now easily accessible and has been accessed and mastered by countries such as China and India, making these nations competitive. Friedman perceives the flattening effect as so insightful as to be compared in scope to the Industrial Revolution.

When economic growth, it creates more jobs opportunities which will cause the labour market to tighten, which in turn will force MNCs to improve working conditions in order to attract workers. Bear in mind, individuals who have no jobs at all are working on alternative jobs which are more hazardous and exploitative than sweatshops. For example, when Child Labor Deterrence Act (US) introduced, there were about 50,000 Bangladeshi children dismissed from garment industry jobs and many of them took up stone-crushing, street hustling or even prostitution. In this sense, the working conditions are far worse than the sweatshops. Jeffrey Sachs also claimed that international trade will, in the long run, make all parties better off. As a result of improving the working conditions, MNCs could have been successfully pursuing ethical branding and shifted out the demand curve for their products which in turn it will bolster the economic expansion and reduce unemployment rate.

The country can maximize their wealth by putting the resources in the most competitive industries. Government created comparative advantage rather than free trade because now easier moves the production processes and the machines into countries that can produce more goods (Yeager & Tuereck, 1984). However, many countries now move to new trade theory suggests the ability firms to limit the number of competitors associated with economic scale (reduction of costs with a large scale of output) (Krugman, 1992). The comparative advantage occurs when two-way trade in identical products, it will useful where economic scale is important, but it will create problem with this model. As a result, government must intervene in international trade for protection to domestic firms (Krugman, 1990)

The process of globalization has numerous significant effects on countries, organizations, and individuals. These effects can be observed in the quality of products, in their prices, but also in their availability. Because of globalization, numerous companies prefer to expand their business on international level. Some of them outsource some of their processes and activities to cheaper destinations that allow them to reduce their investments.

Currently there are 168 million child laborers in the world. More than half of them, 85 million, employed at hazardous jobs, according to the International Labour Organization. In the article “In Praise of Cheap Labor Bad jobs at bad wages are better than no jobs at all”, Paul Krugman Professor of economics at MIT, explains that child labor cannot just be wiped away like so many other distasteful practices. That it takes a perfect storm of economic success and low child labor numbers for a full transition to labor laws that ban it. Employers will agree to follow the law; similar to what happened in the U.S. in the 1930’s when Congress passed the Fair Labor Standards Act. This Act established standards for the basic minimum wage and overtime pay. It restricts the hours that children under age 16 can work and forbids the employment of children under age 18 in certain jobs deemed too dangerous. Krugman believes that many developing countries are not at a point where they can support a full ban on child labor. He gives the example of countries like “Indonesia [who are,] still so poor that progress is measured in terms of how much the average person gets to eat” (Krugman 4). Professor of economics at Yale university, Christopher Udry, in his article “Child Labor” provides a definition of child labor as “ the sacrifice of the future welfare of the child in exchange for additional income” (243). The causes of Child labor are not as simple as cultural or economic reasons, and a

Since in developing countries low-skilled labor are abundant than skilled factors, opening up trade would increase the demand of that factor, so based on Stolper-Samuelson theory, relative prices of that factor will increase. This may result in a decrease in the gender wage gap since women are likely to have fewer observable job skills than men in general (Artecona and Cunningham, 2002). However, some researchers have other ideas. This made the topic as a controversial problem between economists. There are some case study and surveys about this contradiction that will be presented in the

The following pages focus on analyzing the effects of globalization on labor markets, which is an important international business topic. The Introduction presents the points of view used in addressing this issue. The Labor Markets section presents some of the most important characteristics of labor markets that must be presented in order to understand how they are affected by globalization. The Key Priorities of Labor Markets section presents some of the most important priorities of governments determined by globalization. The Globalization of Labor Markets and The Effects of Globalization of Labor Markets section provides an analysis of this issue, its effects and its importance. The Conclusions section provides some of the most important issues addressed by this paper.