Does the Search for Cheaper Labor in Other Countries Hurt the U.S. Economy. After the collapse of the Soviet Union in 1991, the removal of the iron curtain in Europe and the fall of communism in most European countries, the trade and economy certainly entered the global expansion stage. The information, technologies, and capital can currently freely flow least efficient and profitable place to the other, harming the previous place and benefiting the latter. The majority of the first world countries discovered the existence of extremely cheap resources, and labor in foreign countries and had switched the production to abroad. In the following essay I am going to speak about the ways the search for cheap labor in third countries damages the US economy. Also I will attempt to make certain suggestions as to how to solve the problem for the USA as well as suggest how to solve the problems with how cheap labor makes children from the third world countries suffer.
It is a well known fact that in capitalist economy everything is determined by the supply and demand curve interactions, with the equilibrium price being the perfect determinant of what the given goods or services cost (Thompson, 45).
The same principle of supply and demand determines the value of a given worker be it in the USA or abroad. In other words, if the economy of the USA does not expand internationally yet grows, the amount of companies with respect to the existent labor grows, thus making more companies chasing the relatively constant amount of workers in the USA (Smith, 90).
The Essay on Country’s economy
These are goods that cannot be provided by the private sector but are very essential to the development of a country’s economy. They are usually very expensive undertakings with fewer returns or take a long time for the investors to recoup their money back. This makes them to be less attractive to the private sector investors who are mainly driven by the profit motive and would thus be unwilling ...
With the increase of demand for labor, and relative constancy of the US labor supply, more employers chase fewer employees, and thus causing the general level of salaries increase in the USA (Simmer, 241).
Disadvantages of salary increase are also present in the give economic simulation for the fact that with the increase in labor price in the USA will increase the value of the US goods that will reflect the increased labor price in them (Donahue, 132).
In such way, the US goods would be uncompetitive on the international markets, while the foreign goods on the US markets (imports) would appear extremely attractive and thus will be given preference by the US consumers. Ultimately the US companies will fail because of the foreign cheaper counterparts, or the government will be forced to prevent the inflow of foreign goods which is not likely to be the case (Smith, 92).
The perceived damage to the US economy by the presence of the cheap labor in third world countries causes the Americans wonder as to why such injustice exists for Americans.
The typical American believes that if a US company switches production to Mexico or Philippines, the domestic US economy is certainly damaged, which is not always the case (Thompson, 47).
With the switch of production, the US gains the following advantages: Reduction of the product price. The labor in Indonesia costs around $2/day, while it costs over $6/hour in the USA and Europe, meaning that if the pair of snickers was made in Boston, MA, rather than in Jakarta, Indonesia its average price would be over $350 dollars rather than $150 per pair of snickers (Donahue, 133).
Political influence of the USA. Because many of the foreign third world countries rely on the US companies as the source of income and revenue for the locals, the US companies present a powerful lobby in any country they operate in, threatening that if nothing is made to support Americans there, the companies would leave and bring the country into chaos caused by unemployment (Smith, 95).
The Essay on Child Labor Children Work Countries
Child Labor Child Labor, refers to the economically active population under the age of fifteen years old, who are employed in various industries (Grootaert, 2). Recently, child labor has become a large topic of debate; however, in most cases, it is very unfavorable. The perception that globalization is leading towards the exploitation of children, is becoming an important problem for international ...
Proximity to additional markets and resource base.
The US companies that have international presence in third world countries in Asia, are capable of serving the first world countries like Japan, Australia, while the companies that are locate in the Eastern Europe can serve prosperous first world Western Europe. The US companies located in Mexico can serve at a much cheaper price US markets as well as ship the goods to Canada (Thompson, 50).
The third world countries on the other hand, have the opposite situation with the supply and demand interaction thus having an abundance of labor demand that causes the wages go down to almost zero. This causes the following effects on the population (and children in our case): Because of the absence of demand for labor, people have to work for themselves on the fields producing the agricultural commodities that if not give money to the family at least would assure its survival (Simmer, 245).
Because the wages are so low, people have to work for 12-14 hours per day to assure certain compensation for their hard work (Donahue, 136).
Oftentimes, children, have to help their parents do the work and work for 12 hours just like the adults.
The absence of work causes the local authorities agree and support child labor in all industries and long hours (Simmer, 243).
In my personal opinion, the reduction of work-hours for children and adults can be achieved only with the inflow of foreign investors that would cause the increase of demand for the existent labor and ultimately drag the wages up. The macroeconomic laws regarding the wages state that when people start to earn more, they also start to work less at some point-because they would want to have some time to spend the monies and not just work for the sake of money (Smith, 99).
People who earn decent wages start to appreciate their families and try to spend more time with them rather than view them as unnecessary expenditure which is more likely to be in the case with cheap labor and low wages (Simmer, 245).
The Essay on Child Labor Children Work Today
... let these third-world countries know that it is child labor that is a contributing factor to them staying a third-world country, it would help ... most of these jobs were the very same ones that children worked in in the 19 th century) For 16 to 17 ... laborers at least minimum wage, and limited the age of child laborers. It is still the basis for child labor standards today. Some of ...
In conclusion I would like to say that the US companies that go to the third world countries indeed somewhat damage the US economy because they do not increase the real wages of the Americans to the point they would want to see they wages grow. On the other hand they surely benefit the US consumers who are capable of buying the US-foreign product at a cheaper price than they would otherwise buy it. They US companies also benefit the foreign countries by providing them with the means of revenue that possibly can contribute to the reduction of the child labor in these countries and the creation of favorable image of an American in the eyes of foreigners.
Bibliography:
Thompson, Creek, the US economic dynamics, McGraw Hill, 2002.
Smith, Andrew, supply and demand, Prentice Hall, 2001. 2001. Donahue, Mark, Third world countries, Penguin books, 2001. Simmer, Diana, US global governance, Oxford University Press, 2002..
