miklcct
On Moderation
A high-wage economy means labour is generally well paid, for example, Switzerland. However, what I immediately think of is that, a high-wage economy can't be sustainable as its exports can never compete against those made with cheap labour, for example, those made in China. Nearly everything we use daily is made in China, none from Switzerland.
Of course, a high-skilled labour force can produce high-value products which warrant high wages, but, as in every economy, there is always a mix of high-skilled and low-skilled labour, so it's impossible to have everyone earning high wage. If enforced by a high minimum wage, traditional theory is that unemployment rate will increase.
In addition, in a high-wage economy, everything involving labour is unaffordable. For example, in Norway, eating out is a luxury compared to low-wage South East Asian countries where it's very commonplace. This actually means, to me, the quality of life is lower in general because many services which can be obtained easily and cheaply in other countries aren't possible in a high-wage economy. In a low-wage economy, for example, taxis, which are a labour-intensive service, are generally much more affordable so I can easily pay for one if there is any problem on the public transport network. Similarly, I can go out to eat in different restaurants, one after the other every day to try out world cuisine, without taking a big hit in the wallet.
In a low-wage country, I can get the equivalent standard of living earning only 1/3 compared to a high-wage country, which means I can more easily get a job as well as my value is always the same everywhere in the world, and the wage is lower. After compensating the effect of VAT, the value of my skills / products doesn't change according to its geographic location. Similarly, doing business is easier in a low-wage country as I can employ cheap labour to execute my idea. For me, workers are just a component which can be easily replaced, like components of machinery, so they have to be as cheap as possible for my products to be price-competitive.
So, my question is that, how do high-wage economies work when there are always products made with cheap labour available? Should the UK become one or, instead, rely more on cheap labour to make British products competitive?
Of course, a high-skilled labour force can produce high-value products which warrant high wages, but, as in every economy, there is always a mix of high-skilled and low-skilled labour, so it's impossible to have everyone earning high wage. If enforced by a high minimum wage, traditional theory is that unemployment rate will increase.
In addition, in a high-wage economy, everything involving labour is unaffordable. For example, in Norway, eating out is a luxury compared to low-wage South East Asian countries where it's very commonplace. This actually means, to me, the quality of life is lower in general because many services which can be obtained easily and cheaply in other countries aren't possible in a high-wage economy. In a low-wage economy, for example, taxis, which are a labour-intensive service, are generally much more affordable so I can easily pay for one if there is any problem on the public transport network. Similarly, I can go out to eat in different restaurants, one after the other every day to try out world cuisine, without taking a big hit in the wallet.
In a low-wage country, I can get the equivalent standard of living earning only 1/3 compared to a high-wage country, which means I can more easily get a job as well as my value is always the same everywhere in the world, and the wage is lower. After compensating the effect of VAT, the value of my skills / products doesn't change according to its geographic location. Similarly, doing business is easier in a low-wage country as I can employ cheap labour to execute my idea. For me, workers are just a component which can be easily replaced, like components of machinery, so they have to be as cheap as possible for my products to be price-competitive.
So, my question is that, how do high-wage economies work when there are always products made with cheap labour available? Should the UK become one or, instead, rely more on cheap labour to make British products competitive?