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The author makes the classic error of bringing the economics textbook to the real world: with no location based pay, surely some of that chunk of money the mark
by UweSchmidt 6y ago
The author makes the classic error of bringing the economics textbook to the real world: with no location based pay, surely some of that chunk of money the market assigns to wages will be spread to the underpaid people in other places?
In the real world company A tries to squeeze wages in one place and company B obviously tries to hire at local wages in the other place. There is no built-in fairness, it's just a negotiation strategy. The new equilibrium could be that everyone earns less.
I'd rather have that employees around the world can take home a western salary if possible, putting that money into the local economy and raise salary expectations among their peers.
- sand_castles 6y ago> There is no built-in fairness Wage equilibrium around the world is inevitable with the rapid increase in integrated markets and improvement in telephony technology. What this means for workers is far less important that what it means for capitalists. We talk about race to the bottom for workers, completely ignoring race to the bottom for landlords / corporations and governments. landlords around the world have to now compete on a much more even footing. Rise of the corporate sector in China / Russia / Africa puts deflationary pressure on developed countries. Governments that do not offer much, would watch the young and skilled flee to live under better government structure.
- SuoDuanDao 6y agoI don't understand your reasoning, how does the rise of the corporate sector in developing nations put deflationary pressure on developed countries? Wouldn't competition from new economic centres dilute the value of development in Western countries thereby causing inflationary pressure?
- ayo4yayo 6y agoTheir point is that even if wages go down workers are able to move to cheaper areas.
- sand_castles 6y agodeflationary / inflationary have precise meaning in macroeconomics. when JPow says deflationary, what he means is general fall in demand. It could "look" inflationary to a wage earner, if he loses his job, his saving account returns 1%, and the cost of products spiral out of control ( causing a fall in demand from JPow's perspective ). inflationary conditions like those in the 1970s are unlikely as most countries are quite developed these days, and general increase in price in developed countries doesn't mean prices are increasing everywhere for all products.