who benefits and who loses from a shift in jobs to low-wage economies?

Answer 1

in the long run, everyone benefits, IF the shift is not the result of government interference in the markets. Adam Smith showed this several centuries ago in his famous discussion of the pin factory and labor specialization.

in the short run, some workers and capital need to be re-deployed in both the higher wage and lower wage economies. Each used to have someone using some capital that was imperfectly filling the demand for the good being produced -- which demand is now filled by imports from somewhere that the cost of production is lower.

An all too common error is to assume that the low wage economy will import nothing from the high wage economy after the shift occurs. This is false -- the low wage economy will accumulate money from selling its products and that money will be recycled via either purchases or financial investments into the high wage economy. {Example: China, as the low wage economy, is accumulating US dollars. One of the ways they are recycled back into the US is via sales of Boeing aircraft -- a very high wage product -- to growing Chinese airlines. Since over 1/2 of Boeing's sales are to foreign clients, their jobs depend on foreigners being able to sell in America.}

{Note: government interference in the market is, in effect, a tax on free production and consumption. This will always result in less product being consumed with a related reduction in consumer value. Whether the interference takes the form of a tariff, quota, outright ban, or domestic subsidy doesn't really matter -- the result will be the same -- less for everyone.}


does this help??

Answer 2

Great answer Spock