week 6 - Importing goods produced by low-wage workers...

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Importing goods produced by low-wage workers abroad decreases the demand for low-skilled U.S. labor that makes competing goods. Supply and demand analysis shows that the equilibrium wage rate of low-skilled workers making these competing goods and services will fall and experience bears this out. However, dire warnings that sweatshop labor conditions will be imported along with the foreign goods are unfounded. Suppose an employer in the United States faces competition from a foreign producer who pays the equivalent of $1 a day. Explain why, even if there were no minimum wage laws, this employer could not succeed by lowering the wage rates of his or her U.S. workers to $1 a day. All over the world people are never known to work for free. Everyone has a  price whether it be little or small. If the wage were decreased to one dollar  a day, the average American working the average ten-hour days would only  make ten dollars. With this simple fact they could only afford to eat off the 
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This note was uploaded on 03/05/2012 for the course MICRO 101 taught by Professor Seely during the Spring '12 term at Grantham.

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week 6 - Importing goods produced by low-wage workers...

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