i came up with a new theory, anybody want to give me a nobel prize for this?

Question

I'm going to call this the competitive wage theory. I will say that if countries compete in paying their citizens the cheapest wages and benefits with the job that the country will produce those resources and industrialization is bound in that country. An example is China workers versus USA workers. China workers get paid less, so industrialization is more common there than here in the USA. Whoever loses in the competitive wage theory is bound to create another facet of employment from the products produced from industrialization of those products. We see it today that USA is a service economy, no industrialization, but tons of salespeople. Our labor does not pollute, but persuades. Their labor doesn't persuade, but pollutes. Me personally, I think industrial jobs are harder work, but you should be getting paid more so the government of China did not create strong currency rates of employment so the more expensive work is in China.

Answer 1

Sorry, Joseph Schumpeter beat you to this by about 65 years.

Answer 2

Your "theory" fails a basic reality check. You say that the U.S. has "no industrialization, but tons of salespeople". In reality, the U.S. has tons of sales people precisely because is has tons of industrialization; the real industrialization, with machines replacing workers (it's relatively easy to automate the work of an assembly line worker or even a machinist; try replacing a teacher, a nurse, or, heck, a sales rep with a machine). The share of the U.S. GDP produced by manufacturing has remained stable at 16-17% since at least 1960. The percentage of the U.S. workforce employed in manufacturing, meanwhile, dropped from 28% to 11%.

China, by the way, experiences this industrialization, too. Between 1995 and 2002, the U.S. lost 11% of its manufacturing jobs; China, 15%. Japan and Brazil have experienced even faster job loss in manufacturing...

As to the Chinese currency, there are good reasons to believe that it is being kept artificially expensive.

Two currencies are thought to be at a fair value relative to each other when their respective economies are in external equilibrium (exports are approximately equal to imports) AND in internal equilibrium (unemployment is at a non-inflation accelerating level). In terms of external equilibrium, China has a substantial trade surplus with U.S., which must put an upward pressure on the Chinese currency. Internally, however, things are very different. China has an enormous frictional unemployment (every year, enough people move from countryside to cities to populate a city the size of Houston), so all things considered, its currency may well be overvalued.

Also, consider this. China consistently has a higher inflation compared to the U.S., yet the yuan is not losing its value relative to the dollar, which is a sign of the currency value kept artificially high (sort of like the Argentinian peso during the currency board period).

Answer 3

I just want to remind you to calculate the wage in the money of the country. I'm amased that in USA or in Europe we say always that in China someone works hard only to gain 150 € or $, but in chinese money it's 1500 RMB, and 1500RMB in China is equivalent to about 1500$ in USA, in view of the difference of price.