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“High-Wages” Means “High-Productivity”

Summary:
Here’s a letter to a commenter at AIER, one Mr. Robert Young: Mr. Young: Commenting on Jeffrey Tucker’s essay “Tariffs Have Not Been Paid by China; They Have Not Raised Revenue on Net,” you suggest that the level of wages in high-wage countries will fall if residents of those countries can trade freely with producers in low-wage countries. You’re mistaken. Wages in the U.S. and other high-wage countries are higher than are wages in low-wage countries not by chance. These wages are higher because workers in high-wage countries are more productive than are workers in low-wage countries. That is, compared to workers in low-wage countries, workers in high-wage countries on average produce more value per hour for their employers. High-wage workers are more productive, in turn, because they

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Here’s a letter to a commenter at AIER, one Mr. Robert Young:

Mr. Young:

Commenting on Jeffrey Tucker’s essay “Tariffs Have Not Been Paid by China; They Have Not Raised Revenue on Net,” you suggest that the level of wages in high-wage countries will fall if residents of those countries can trade freely with producers in low-wage countries.

You’re mistaken.

Wages in the U.S. and other high-wage countries are higher than are wages in low-wage countries not by chance. These wages are higher because workers in high-wage countries are more productive than are workers in low-wage countries. That is, compared to workers in low-wage countries, workers in high-wage countries on average produce more value per hour for their employers.

High-wage workers are more productive, in turn, because they are highly skilled and work with that which is not available to workers in low-wage countries – namely, lots of machines and other capital, as well as relatively advanced and abundant infrastructure. Also, workers in high-wage countries operate in societies with high trust. High trust – by reducing the costs of monitoring, thievery, and corruption – further increases the value of workers’ outputs.

In short, “high-wage workers” is simply another term for “high productivity workers.” Because freer trade of high-wage countries with low-wage countries does nothing to reduce the productivity of workers in high-wage countries – quite the contrary, such trade increases that productivity – workers’ wages in high-wage countries will only generally rise as those countries trade more freely with other countries, including with low-wage countries.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

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