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International Trade Debate: Discussion of Nuances
International Trade
The development of the modern human society is associated with the processes of globalization and trade liberalization (Mankiw, 2004). Although widely claimed to be positive, integrative processes, both globalization and liberalization of international trade affect the economies of developing countries negatively making the poor even poorer and giving the rich the opportunities to increase their assets.
Thus, the first reason to argue against unrestricted international trade is the fact that the latter increases the gap between the rich and the poor. Given the international trade is unrestricted, the highly developed countries can find the more favorable tax climate and lower labor force prices in the developing and poor countries. As a result, the developed countries increase their assets, while the labor force of the developing countries becomes even poorer working full time for intentionally reduced wages (World Bank, 2008).
The tax system which is usually milder in developing countries attracts international businesses and damages the domestic economy as well. The developing countries are in need of additional funding to support economic growth, but unrestricted trade deprives these countries from incomes potentially provided by taxes paid by developed international businesses (World Bank, 2008).
Finally, the issues of unemployment and cheap labor force also evidence against the unrestricted international trade. On the one hand, such trade involves the usage of cheap labor force from developing countries thus not allowing this labor force to develop and earn higher wages. On the other hand, unrestricted international trade deprives domestic labor force of employment opportunities as having no restrictions businesses can find cheaper labor force abroad.
Area of Employment
The area of employment is a specific segment of the labor market at which all important production factors like supply, demand, capital, etc. are observed. An interesting trend can be observed in any area of employment and in their intersections. Some professions bring people more income, while others are less profitable. This difference can be explained by the different supply and demand for this or that profession in the labor market, and by the necessity of the latter to reach the point of equilibrium between the quantity and the price of labor force (Mankiw, 2004).
Thus, for example, if a sales assistant earns the average assumed wage of $20,000 annually and a professional basketball player might earn up to $2 3 million annually, it can be concluded that the supply of the latter profession is lower that of the former, while the demand is higher. Therefore, the higher demand and the lower supply of labor determine its high price, while the excessive supply accompanied by the lacking demand reduces labor force price (Hall, 2005).
Accordingly, the above mentioned equilibrium of labor market is reached when the supply and demand for labor force are put in accordance and the wages earned by workers match perfectly the quantity of the latter in the market of labor (Mankiw, 2004). In case if immigration, educational trends, or any other factor changes either of the phenomena, i. e. supply or demand, the equilibrium point changes respectively (Mankiw, 2004). For example, if the educational establishments prepare the larger number of computer programmers than the last year and demand for this profession remains the same, reaching the equilibrium will involve reduction of wages for programmers as supply will exceed demand (King, 2009).
Security Personnel Demand
The events of September 11, 2001 changed the market of labor to increase the demand for security service workers. Needless to say, the higher demand for the workers of this area of employment shifted their equilibrium wage to the higher levels under the conditions that the supply remained at the same level as before 9/11 tragedy. However, the supply might also grow based on the observed higher demand and this might either stabilize the equilibrium wage on the former level or decrease it when the supply becomes excessive (Mankiw, 2004).
On the whole, the two factors that affect labor demand are output price and technological change. The former increases demand when it output price growth, and decreases demand when the price falls. For example, funding of security personnel was increased after September 11 tragedy and this facilitated labor demand. Technological change allows employers to widen their capacities and this increases demand for labor force to satisfy the needs of those increased capacities.
Change in tastes and immigration are the two labor supply determining factors. The former concerns the popularity of a profession and its attractiveness from the financial viewpoint. The latter factor changes the actual demographic conditions and population quantities naturally modifying the labor force supply in an area (Hall, 2005).
Personal Impact of Labor Market Changes
Ordinary people are also affected by labor market shifts of supply and demand. My friend graduated a university with a degree in law but the decreased demand for the profession conditioned by the excessive supply made him choose between working for reduced wages or being unemployed and trying to get another profession whose equilibrium wage is higher than in the profession of lawyer.
References
Axia College. (2007). Axia Colleges Writing Style Handbook.
Hall, R. (2005). Employment Fluctuations with Equilibrium Wage Stickiness.
King, W. (2009). Equilibrium in the Market for Labor.
Mankiw, N. G. (2004). Principles of economics (3rd ed.). Chicago, IL: Thomson South-Western.
World Bank. (2008). Globalization and International Trade.
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