Monday, December 01, 2008

Why Are Wages Low in Developing Countries? - Art Carden - Mises Institute

Art Carden explains why wages are low in developing countries.

[I]t stands to reason that if workers in developing countries are underpaid and exploited, a profit-seeking businessperson would be able to reap immediate profits by hiring the workers away from their current occupations and re-employing them elsewhere.

If people pass on the opportunity, Caplan argues, then they implicitly accept the tragic-but-nonetheless-real fact that workers in very poor countries simply are not very productive. Low wages, then, are not the product of exploitative multinational corporations but of extremely low productivity...

[T]he textile sweatshops derided by rich westerners offer higher wages and better working conditions than the alternatives in very poor countries. People in developing countries need more sweatshops rather than fewer.

Regulation also will not change the productivity of very poor workers...

Can companies "afford to pay more?" Again, the answer is no. Firms might be able to pay above-market wages in the short run... In the short run, we can improve standards of living for some people. In the long run, this illusory prosperity comes at the cost of increasing future poverty...

The idea that expanding and integrating the global marketplace exploits the poor is a myth that causes avoidable misery. Protesting and trying to slow the advance of international capitalism is not the solution. Encouraging the development of institutions in which the world's poor can increase their productivity is.

Why Are Wages Low in Developing Countries? - Art Carden - Mises Institute

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