The Pauper Labor Argument refers to the idea that countries are misguided in importing from low wage countries. Many feel that the need for countries to compete with these lower wages causes wages to drop in their own country. This is in contrast to the idea that trade benefits all of the countries involved. With competition from other countries increasing, the idea of the Pauper Labor Argument has been in the forefront of economic consciousness.
Even though the Pauper Labor Argument raises some very valid points it also has some fallacies. The argument assumes that wages and the cost of production are related or are equal to one another. There is also the issue of productivity. The average wage in a company is often in correlation with the average labor productivity. Economies are usually described in two different forms, external and internal. In the external economy the cost per unit or wages depend on the size of the industry but not the size of the business. In an internal economy the cost per unit and wages depend on the size of the business not the size of the industry. The competitive advantage of a business depends on productivity in relation to foreign business. The wages should also relate for a competitive advantage. However while this trade may make for a more competitive environment, our home country has a cheaper production cost for labor to contribute to trade, for example it may be cheaper one product in one country, but it may be cheaper to produce a different product in the US. Not all products and labor can be classifies as either helpful are harmful in regards to trade. Even though we may be spending money on international trade they are in turn spending it on our products and services equaling out the differences in wage and production.
Based on a chart of median working incomes of workers in the United States, it would appear that foreign trade is neither helping nor harming American salaries. The chart shows that income has changed very little between 1970 and 2012. There are no really drastic gains or loses. This may indicate that the effects of foreign trade are not the substantial in terms of the change in wages of US citizens. Since foreign trade has went up, if the Pauper Labor Argument were true then wages would have went down drastically. However this data is difficult to discern any really answer in regards to the Pauper Labor Argument. Many other factors affect wages, including social and economic events. Productivity, industry size, and business size all play a role in determining efficiency and competitive advantage. There are also a greater number of people now in the US workforce than there were in 1970(Landsburg). For example women and minorities are much more likely to have higher profile jobs than they might have in previous years. This changes both the competitive market for jobs and salary but also the median income. The demographic for the job market has changed but the data has not making it difficult to get an accurate picture of wage growth (Landsburg).In conclusion, based on the evidence put forth it would seem that the Pauper Labor Argument cannot be substantiated. There are too many differences within foreign trade that must also be taken into account, not just the wages of our country.
Works Cited:
Landsburg, S. "The Numbers Racket at Steven Landsburg | The Big Questions: Tackling the Problems of Philosophy with Ideas from Mathematics, Economics, and Physics." Steven Landsburg | The Big Questions: Tackling the Problems of Philosophy with Ideas from Mathematics, Economics, and Physics. N.p., n.d. Web. 3 Feb. 2013.
