Poverty & Wages
Question a
Poverty can be defined as a condition of inability to live normal life because of existing economic conditions. Currently, there are several root causes of poverty in the world. They could be classified as individual or aggregate causes of poverty. Individual causes are those that affect an individual person while the aggregate ones are those that affect the whole population or economy. The causes of poverty may or may not have remedies.
Low levels of education and lack of skill is one of the root causes of poverty, especially in the developing countries. Lack of proper education will lead to unawareness of individuals. These people will not have acquired the necessary skill needed to help them develop, both technologically, entrepreneurially and agriculturally. This has been witnessed in the developing countries in Africa and Asia where poverty levels are high while education levels are very poor.
Agricultural cycles of production. For any economy to excel there must be a vibrant agricultural sector. Households depend on the production for consumption and some produce for commercials purposes. At times natural disasters like drought and floods destroy the agricultural crops on the farms hence depleting these people of their food and their means of earning a living. In case of such a situation, people could end up poor because they do not have food and what they do for a living is destroyed.
Natural disasters such as earthquakes, floods, hurricanes cause communities that are affected to suffer. This is because the disasters cause acute crises both socially and economically. Natural disasters cause loss of shelter for individuals as well as work places, infrastructure and food production hence poverty.
Corruption and social inequalities are other root causes of poverty. Corruption will lead to few people benefiting from the public resources while the majority of the population suffer in poverty, corruption results in social inequalities where by the society will be unequal. The rich will be few while the poor will be many. This may even result into social evils.
The solutions to poverty may include;
Corruption eradication. This is a social evil which results in harming the whole society. It should be eradicated so as to ensure that public resources are properly utilized to the benefit of all. Transparency must be emphasized. Equal distribution of resources. The public resources should be allocated in a fair manner to ensure everyone benefits.
Increase access to technology and education for everyone. Education should be made a priority so that even marginalized people access it. This will equip the people with something to earn themselves a livelihood. Technology should be improved so that people can produce agriculturally and industrially to increase their productivity. The health sector should be improved to ensure that people are healthy and productive.
Question b
Wages in the countries like the United States of America are usually higher than other countries like India and China. This is because the wages in America are predetermined. In America, there is a minimum wage set by the Federal authorities at US$7.25. More so, the states can also set their own minimum wages, in such a case, the higher wage between the state and the federal wage will be the binding wage. The predetermined wage ensures that all workers in such a country are not paid any amount less than the stipulated amount. However, in countries like China and India, there are no minimum wages set. In such a situation, there are no wage regulations on the labor market. Therefore, the difference in wage rates is because of the presence of wage price regulations. Those countries with wage regulations have higher wages than those without. The Chinese and Indian wage markets are not interfered with by the government. The market is allowed to regulate itself in that the employers have no minimum wage to pay the employees.
Another reason why the wages in the United States is higher than that in China and India is because the cost of living in China and India is relatively lower compared to that in the United States. The increase in living standards is influenced by among other factors inflation. Inflation causes the prices to go up, hence the currency losses value. The wages will then be adjusted to accommodate the new level of inflation hence wages go up.
The labor requirements could also be the cause of the wage rate in the United States being higher than in China and India. The labor requirements in America are very much employee friendly hence employees benefit from the higher wages. In China and India, the labor requirements are less stringent hence employers can set their wage rates as low as they want to because there are no strict rules.
References
Gwartney, J. D., Stroup, R. L., Sobel, R. S., & MacPherson, D. (2008). Economics: Private and Public Choice (12, illustrated ed.). London: Cengage Learning.
