This wage level would not be so excessive to seriously erode the current competitive wage advantage of workers of the LDCs, but would give western workers the possibility of obtaining employment in cases where they could demonstrate superior productivity capabilities.This will provide a win-win situation worldwide because the advantages obtained would far exceed the few disadvantages. Foreign governments, now having significant cost advantages for their workers but concerned with a loss of their share of world manufacturing, need not worry. Even a $5/hour wage would still provide their workers with a significant advantage over their foreign counterparts. Western workers would have to provide significant productivity capabilities to overcome this.
The advantages to a minimum wage are phenomenal in contrast:
Foreign workers in tradable goods industries will have considerable more income. This will spread out over their economy in general causing a widely-based increase in the standard of living. Their governments will have a large increase in tax revenues allowing them to expand social programs for the less-fortunate in their societies(e.g., farmers). Overall, most communities worldwide will have a significant increase in purchasing power which can be spent by the citizens of the LDCs on the very tradable goods they are producing but previously unable to purchase.
Foreign governments will not need to go begging to the WTO or IMF(or do their bidding) because they will no longer need the loans these organizations reluctantly dole out. Instead they will be paying off their outstanding international bank loans allowing export earnings to be used to pay for import of the foreign-made goods they are so fond of, rather than simply providing for interest payments to foreign banks.
American and foreign workers will be better able to fairly compete for the right to do the world's manufacturing and, with a worldwide increase in money supplies, increased consumption would lead to an overall increase in production and employment of workers worldwide. This would result in an increase of pride and self-respect for all production workers, foreign and western alike, previously underemployed or unemployed. Social cost (e.g., unemployment,welfare) would significantly decrease, providing more opportunity for further governmental support for other elements of their societies.
Multinational companies worldwide will experience an initial decrease in profits caused by increased labor costs. Subsequent increases in revenue from both foreign and western consumers would provide profit gains far exceeding these costs resulting in a real increase in shareholder values based on production, capital equipment improvements, as well as a concurrent improvements in technology.
And finally, the establishment of a minimum wage would end the most egregious and ever-increasing exploitation of workers worldwide. International manufacturers have continually moved production to the countries with the lowest wage levels to reduce costs, taking advantage of the most poverty-stricken members of the world. American companies moved production from Mexico to China because the Mexican workers' $3/hour wage was just too generous in comparison with the $1/hour prevalent in China. This practice has forced other countries to effectively lower their own wage levels to compete, resulting in an ever-increasing spiraling downward of wage levels already far below that what an average family presently needs to survive on. This is a despicable practice effecting workers worldwide and needs to be stopped.
This proposal is based upon my desire to effect two goals, one to roughly equalize worldwide wages so that western workers would have an opportunity to once again find meaningful employment, the other to end the exploitation of foreign workers caused by the practice of multinational companies and their partner's practice of paying subhuman wages. Enough is enough!
Profit margins of foreign-made products in the LDCs would decrease from 60 to “just” 40 percent.
The number and price of exports to the U.S. from southeast Asia, for example, would remain around $1 trillion.
Profits for multinational and their local partners would decrease by $200 billion, and foreign workers would have received this as increased income. Since well-run foreign governments normally require 50 percent participation, by (local) government or private partners, the "loss" of profit to the multinational firms would be approximately $100 billion. Because of U.S. laws, created to promote this "end run" around hiring U.S. workers, these multinationals have been not only exempt from U.S. taxes, they have not been required to repatriate these funds. If some have been inadvertently repatriated, they have been most-probably just investment in U.S. stock market speculation and have contributed almost nothing to U.S. production and employment.
Of this income now available to foreign workers, $40 billion would be collected by foreign governments as taxes, to be used to increase the services and benefits to other citizens.
Out of the remaining $160 billion available to consumers, foreign workers would be buying western-made products of perhaps $50 billion, leaving over $110 billion dollars in consumer dollars to be spent locally. An increase in money supply in consumer's hands and spent locally usually results in six times as much local spending(i.e., the “multiplier effect”), each purchase allowing further purchases from other people in the community. This would increase the GDPs in these countries by upwards of $600 billion, resulting in perhaps a 50 percent increase in living standards for many of these people.
The $50 billion going into the purchase of foreign-made (western made) products could potentially result in respectable employment of upwards of 2 million more western workers.
Western workers would be competing for worldwide production against foreign workers making $5/hour instead of the current wage rates of 65 cents(India) to one dollar(China) with which they have no chance to compete. The playing field would be leveled to the point that productivity would again be the determining factor in choosing who deserved to be employed.
This proposal deals solely with America's trade with the LDCs. When combined with similar benefits obtainable for the workers of LDCs through trade with other western countries, the potential benefits are tremendous.
I am well aware that many countries will resist this proposal in anticipation of gaining a trade advantage over those who would be willing to comply. The answer to this is quite simple, one that has been commonly used as a basis of duties in the past. Importing countries complying with the rules would be required to impose import duties for products manufactured in the non-complying countries equal to what the labor costs should have been.