In a recent post, Kevin Erdman uses the concept of Never Never from price changes to explain why low wages do not give countries the benefits of international trade.
Confusion arises from the idea that “everything else was held equally.” All of these costs are part of the web of interconnected interactions. Interest rates may be high-end. Therefore, at the micro level, the interstitial appears to be higher, whereas at the macro level it is often associated with more activity.
Similarly, with wages. High wages are a product of the quality of the local economic and public institutions. They are the product of a wide range of options that the world has access to. They are the result of productivity that arises from a web of collaborative, competitive behavior and impermeable misconceptions that exist in economically sophisticated communities.
Production moves to places where productivity increases and engines are improved. Production moves to a place where more can be produced. Production moves to places where wages are rising, not where wages are low. Production appears to be moving to a place where wages are low. The places where improvements are most likely to be made are those that have deteriorated.
Let’s take a look at 20 countries with the highest wages in the world, provided by Numbereo.com.
(Ideally, I would like to use pre-tax wages, but I couldn’t find that data. Still, this is a list that uses highly correlated appropriateRote data in this list.)
Of the 10 highest-wage economies, only three trade deficits (US, Iceland, Australia) means that of only three highest 10 best trade obstacles (UK and New Zealand), only 15 of 20 high-wage countries are carrying out the surplus. Even if you rule out four oil and gas economies, you’ll still run 16 driving surplus. High wages tend to be related to trade surplus.
As a general rule, countries that are implementing trade deficits fall into two main categories.
Speak low-wage English
The general rule is that countries that carry out trade surplus tend to fall into three main categories.
Highly paid energy exporters are Conf’s Culture (East Asia).
In summary, there is no evidence at all for the claim that “work is leaving the US because we pay high wages.” Wages primarily reflect productivity.
Don’t infer from wage levels.
Poem I often argue that bilateral trade balances are meaningless. A recent article in the Financial Times offers another reason why this is.
Chinese exporters are stepping up efforts to avoid tariffs humiliated by US President Donald Trump by shipping goods through third countries to hide their true origins.
