Essay about Foreign Workers, Low Wages

1115 Words Nov 10th, 2012 5 Pages
Is it fair to workers of developed countries when companies shift work to lower wage countries?

The main reason companies shift work to lower wage countries is to reduce operating costs. Low labour, production, and energy costs in countries such as China, Japan, India, and Mexico is causing companies to shut their factories within the United States and open new factories in those foreign countries. This leads to the loss of jobs within the United States, a lower standard of quality, and resentment by those who are living within the United seeing more and more of their jobs going overseas. In 1994, NAFTA (North American Free Trade Agreement) was passed by then President Bill Clinton. His goal was to open the trade routes to
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The workers in the less developed countries are willing to accept a fraction of the salary the workers in developed countries like America are earning for the same job. Most jobs that developing countries are losing are service jobs. Developed countries have the capacity and innovative capability to create new opportunities for its citizens. This means creating more skilled and technical jobs. A developed country such as America has an abundance of capital to their disposal. Factor Proportions Theory that countries like China and India with big labour force will focus on labour intensive goods, and countries like Sweden with more capital will focus on producing goods that are capital intensive. The theory is criticised when taken the following into consideration:
1. Other factors – like minimum wage laws which leads to higher prices for relatively abundant labour - therefore making it cheaper to import rather than export.
2. Leontiff paradox – The United States makes export more labour intensive, this is due to the high tech products with high labour quality input rather than man hours of work e.g. level of education will also affect a country's advantage rather than its scarcity or abundance. The prospect of losing millions of jobs to low-wage countries is not just an issue in Europe. In the United States, Congress and presidential candidates have diverted their rage at China sucking away US

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