pauper labor

Econ 102 Writing Assignment

The ‘pauper labor’ argument is a view that proposes that a country loses by importing goods and services from another country having low wages, presumably by lowering the wages at home. This is argument is oblivious to the fact that the low wages arise from low levels of productivity in the country in question. It also ignores the fact that countries with higher wages and subsequently high productivity will have a considerable advantage over the low wage country. This will enable them to have the upper hand in trade, as they will acquire the goods at a much lower price. This will result in higher profit margins from them since their expenditure is reduced significantly.
The pauper labor argument is a fallacy. Trade unions in the developed countries created it. They claimed that if the wages were lower in the developing countries, the cost of production of the goods would be reduced. Therefore, these reduced prices will make the prices of the associated goods drop in the market. If the countries followed the free trade policy, there will be an expected influx of goods into the developed countries’ markets. This will result in an increase in supply due to the increased availability of the goods in the market. In accordance with the law of demand and supply, the increase in supply will decrease the demand for the good. This will make the prices of the goods reduce, which will cause a subsequent drop in the wages of the workers in the developed countries. This will eventually cause the workers to be poor. The above argument is fallacious since it contradicts several aspects of business. It suggests that the cost of wages is directly proportional to the productivity of the firm. However, this is not the case because some developed countries have significantly high levels of productivity, but their wages are quite low. The quality of the goods produced in the developing countries is considered to be of lower quality compared to those from the developed countries. This makes them unable to compete with their goods due to this assumption. With all this in mind, the pauper labor argument is a fallacy.
The long-term pattern weakens the claims of the proponents of the pauper labor argument. This is because the average wages of the American workers has been dropping since 1990 (The Bureau of Labor and Statistics, 14). This drop does not correspond to their productivity since it has not been affected. The productivity has, in fact increased contrary to this argument. This drop cannot be blamed on the recession as it begun even before it occurred. This, therefore, weakens the pauper labor argument. It is difficult to draw conclusions about the validity of the pauper labor argument from the given data. This is because such data provides an overall analysis of the situation. The graphs do not consider each demographic group as a separate entity but rather a group. Therefore, if any of the individual demographic groups have progressed, it will not have a great effect on the outcome. This may be due to an increase in lower income groups into the market that portrays an outright illusion that there is a drop in the wages of the workers. In addition to this, one cannot derive certain conclusions from such graphs even with the help of the argument. This, therefore, makes drawing conclusions about the Pauper labor argument difficult.

Work Cited

N.a. “Median weekly earnings 1970-2012”. 19 April 2012: 12-16. The Bureau of Labor and Statistics. Web. 21 Sept. 2012.