Pauper Labor Research Paper

The pauper labor argument is a view that proposes that a country incurs losses by importing goods and services from a different country with low wages , presumably by lowering the wages at home. This argument is oblivious to the fact that low wages result from low levels of productivity in the country in question. It also ignores the fact that countries with high wages and subsequently high productivity have a considerable advantage over the low wage country. This enables them to have an upper hand in trade as they can acquire goods at a much lower rate. This ultimately results in higher profit margin due to considerably reduced expenditures.
The pauper argument is a fallacy. It was created by trade unions in the developed countries . They claimed that if the wages were low in the developing countries, the cost of production of goods reduced. These reduced prices thus make the prices of the associated goods to drop in the potential market. If the countries followed the free trade policy, there is an expected inflow of goods in the markets of developed countries. This results in an increase in supply due to increased availability of goods in the market. According to the law of demand and supply, the increase in supply decreases the demand for the good. This reduces the prices of goods which in turn causes a subsequent drop in the wages of the workers in the developed countries. The graph shows a significant growth increase in the median weekly earnings of the American citizen from the year 1996, just two years after their top ten traders average wages started to fall. The data from the graph appears to support the proponents of the pauper labor argument since the fall in the US partner’s average wage, a rapid increase in the US median weekly earnings has increased and surpassed the previous 1979 high of $320 per week. However, this time series is not appropriate in verifying the pauper argument since the data only shows medians and therefore does not show income growth above the median point. In addition, it only portrays raw incomes and not the value of benefits derived since they grow faster than incomes.
Therefore, the above argument is fallacious as it contradicts several aspects of business. It suggests that the costs of wages are directly proportional to the productivity of the firm. It suggests that the cost of wages is directly proportional to the productivity of the firm.