Thursday, June 24, 2010

Relative Labor Costs

This graphic (HT to Chartporn) is telling in a couple of ways. On the surface, it would seem to reinforce the idea that firms move to other countries to save on wages. (But as is sometimes said "if wage was the whole story, Bangladesh and Ethiopia would be the industrial capitals of the world.")

But the true value of the graphic is in the follow-up questions. If so many countries have a wage advantage, why does organized labor often support a higher minimum wage? And why do many firms stay in the U.S.?

The answers may lie in the concept of productivity and/or self-interest. I'd be interested in your thoughts.


Steve Blitz said...

great chart, but it is not clear exactly what kind of worker is being compared. and while minimum wage is higher here, the work being done by those overseas is work that isn't done here.

Tim Schilling said...


You are right that it is not as complete as one might like it.

Do you think it's fair to imply that the chart is comparing unskilled labor? I would presume so only because that's the segment that is targetted by minimum wage (whether we like it or not).

Regardless, I think this can provide a starting point for classroom discussion about the topic. That was my intent in suggesting it as a teaching tool. Do you think an appropriate next step could be to have students do some research?