Is the huge supply of unskilled labor in the global economy holding down the wages
of American workers? Increased trade, especially with less developed economies such as
Mexico, China, and India, with their huge numbers of low-wage workers, creates competition
for American workers. It is difficult to raise the wage levels of American jobs, especially
in labor intensive industries, in the face of such competition. American corporations may
initially respond by increasing their investment in capital and technology, making American
workers more productive and hence capable of maintaining their high wages. But over time developing nations are acquiring more capital and technology themselves. And U.S. corporations can move their manufacturing plants to low-wage countries, especially to northern Mexico where the transportation-costs of moving finished products back to the U.S. market are minimal.
Worsening Inequality. U.S. export industries have thrived on international trade expansion,
adding jobs to the American economy and raising the incomes of their executives and their most highly skilled workers. But the combination of effects of international trade on the American economy-lower wages for less skilled workers and higher wages for executives and highly skilled workers-worsens inequality in the nation. inequality can worsen even though the aggregate income of the nation rises.
Inequality in America is worsening. The percentage of the nation's total family income
received by the poorest quintile (the lowest 20 percent of income earners) declined from
4.3 percent to 3.4 percent between 1975 and 2005. Mean while the percentage of total family
income of the highest income earners increased from 43.6 percent of total income to 50.1 percent. Figure 9-5 shows the percentage of losses and gains since 1980 of families in
each income class. Lowest income families have lost nearly 25 percent of their share of
income over these years, while the highest income families have gained 16 percent of their
share. The top 5 percent of families have gained 43 percent.
Is the huge supply of unskilled labor in the global economy holding down the wages
of American workers? Increased trade, especially with less developed economies such as
Mexico, China, and India, with their huge numbers of low-wage workers, creates competition
for American workers. It is difficult to raise the wage levels of American jobs, especially
in labor intensive industries, in the face of such competition. American corporations may
initially respond by increasing their investment in capital and technology, making American
workers more productive and hence capable of maintaining their high wages. But over time developing nations are acquiring more capital and technology themselves. And U.S. corporations can move their manufacturing plants to low-wage countries, especially to northern Mexico where the transportation-costs of moving finished products back to the U.S. market are minimal.
Worsening Inequality. U.S. export industries have thrived on international trade expansion,
adding jobs to the American economy and raising the incomes of their executives and their most highly skilled workers. But the combination of effects of international trade on the American economy-lower wages for less skilled workers and higher wages for executives and highly skilled workers-worsens inequality in the nation. inequality can worsen even though the aggregate income of the nation rises.
Inequality in America is worsening. The percentage of the nation's total family income
received by the poorest quintile (the lowest 20 percent of income earners) declined from
4.3 percent to 3.4 percent between 1975 and 2005. Mean while the percentage of total family
income of the highest income earners increased from 43.6 percent of total income to 50.1 percent. Figure 9-5 shows the percentage of losses and gains since 1980 of families in
each income class. Lowest income families have lost nearly 25 percent of their share of
income over these years, while the highest income families have gained 16 percent of their
share. The top 5 percent of families have gained 43 percent.
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