Freeman: Are your wages set in Beijing?

Freeman, RB. 2000. 'Are your wages set in Beijing?'. International Political Economy: Perspectives on Global Power and Wealth.

In the last fifth of the 20th century, there was a decreased demand for low skilled labor in developed countries and an increase in this demand in certain developing countries. This sparked a new debate about the effects of developed countries trading with less developed countries. "The new debate focused on one issue: whether in a global economy the wages or employment of low-skilled workers in advanced countries have been A(or will be) determined by the global supply of less-skilled labor, rather than by domestic labor market conditions. Put crudely, to what extent has, or will, the pay of low-skilled Americans or French or Germans be set in Beijing, Delhi and Djakarta rather than in New York, Paris or Frankfurt?" (16).

"One one side of the new debate are those who believe in factor price equalization--that in a global economy the wages of workers in advanced countries cannot remain above those of comparable workers in less-developed countries. They fear that the wages or employment of the less skilled in advanced countries will be driven down due to competition from low-wage workers overseas. On the other side of the debate are those who reject the notion that the traded goods sector can determine labor outcomes in an entire economy or who stress that the deleterious effects of trade on demand for the less skilled are sufficiently modest to be offset readily through redistributive social policies funded by the gains from trade. They fear that the neoprotectionists will use arguments about the effect of trade on labor demand to raise trade barriers and reduce global productivity" (16).

The rest of the article expands upon the above summary.