Cheap labor is more expensive in the long run

Question

I always wonder if cheap labor is always bad for the economy.

Need some inputs.

See this page:

http://theincorrect.com/smallBuz/hand_car_wash.htm

Answer 1

It depends on the productivity of the workers and the wage of the worker.  For instance:

If Peter can make 3 stoves in an hour an is paid 12 dollars an hour, each stove cost 4 dollars.

If Juan can make 2 stoves in an hour and is paid 8 dollars an hour, each stove cost 4 dollars.

As you can see, productivity and WAGE determines who is actually "cheaper".  Who would you hire Juan or Peter.  The correct answer is that you would be indifferent in this situation,

Answer 2

How long do you think anyone stays at minimum wage? The answer is, not very long. Most folks who are working at minimum wage jobs are high-school or college students trying to make extra money, retired folks who want extra income or folks in the middle who want to make extra money.

I seriously doubt that the US Census data shows that minimum wage employees have an average of 3 dependents. The only case where that might be accurate is if you are talking about a second job, and this would be for a very limited (6 month) time frame. Just think about how long you've ever worked at minimum wage? Usually, after 3 to 6 months, most employers give a merit raise to employees as a way to keep them and recoup the investment of time and training that they've ploughed into that employee.

But the entire minimum wage discussion, when posed by democrats, is really just about the unions. See, unions are one of the biggest contributors to the DNC (along with trial lawyers) and the contracts that unions use have a factor that's tied to the minimum wage.

Of course, union workers aren't paid anything close to minimum wage because their union has managed to extort artificially high pay rates for the union members. The union members, of course, have their union dues taken out of their paychecks. In union states, this is a horrific scam and it is the major reason why companies move offshore or to non-union states.

But back to the original issue of cheap labor. It goes back to supply and demand. Why do you think almost every plastic or rubber part is made in China and not the US? Because China has a labor force of one billion people. This high supply of labor means that businesses can demand a lower wage because there is a high demand among laborers for the jobs.

On the flip side of this, physicians and engineers make a lot more because there is a high demand for their skills and a low supply of available labor. The businesses have to increase the pay that they offer if they want the employees.

Answer 3

I hope you are not the author of that article. It is terribly bad gramatically, and even worse in economic thought.

Just for one, how does California pay for education? Does the state's cost of education decrease when the car wash fires an employee?

Answer 4

That just isn't true historically.  Cheap labour is often the only competitive advantage a poor country has to gain a foothold in the international markets.  Which attracts further investment and economic development.  The problems occur when national leaders squander the economic gains on things that don't improve the countries long term competitiveness.  Look at the majority of Asian countries that started out with nothing and now have high tech industries, good education systems, universities, and health care systems all thanks to the sacrifices made a couple generations ago by cheap labourers.  Korea went from one of the poorest to richest countries in the world in under 30 years.

Answer 5

You might want to actually get your facts correct.

    * Average household income of a minimum wage earner: $49,885

    * Proportion of minimum wage earners under 25: 53 percent

    * Proportion of all adult hourly workers who are single parents working full time: 6.3 percent

    * Proportion of adult minimum wage earners who are single parents working full time: 6.1 percent