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Wage Gap Between China an Us

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The wage gap between US and China

The importance of international trade increased dramatically for the US as well as China. The ratio of the sum of exports and imports to GDP approximately doubled from the early 1970s to the mid 2000s for the US. And there is a striking feature that China was involved in about 7% percent of world trade by the mid-2000s. There is no doubt that the international trade have influenced the wage level around the world.

Do wages equalize between US and China?
It is the most remarkable conclusion of the Heckscher-Olin theory that trade can equalize the price of each factor of production across countries. Nevertheless, the long-term effect didn’t complete in the real world, especially in China. On majoy …show more content…

Since it is less developed, we are rarely seeing what the labor union take measures today. While before it took more responsibility to deliver the Party’s policy to labors.
In another aspect, all of the companies are aimed at the maximium profit, trying their best to cut costs and reduce wages. The companies are more powerful in the labor market, so the wage is decided mainly by them.

In conclusion, because of the relationship in demand and supply in Chinese market, the labors’ competency, the labor union’s situation and the purpose for the company, Chinese labor has been undervalued. And this is a reason for the generation of Chinese and American wage gap.

D. Technological Progress
Also as we get the conclusion from the case in our book, technological progress plays an important role in increasing the wage gap between Chinese labors and American labors.
The first aspect is that with the development of technology the cost and prices of some skill-intensive products decline, and the quality of these products is improved, demand for the products increases. As demand shifts toward skill-intensive products and their production increases, the demand for skilled labor expands, increasing the relative wage of skilled labor.
The second aspect is the technological progress that has occurred within individual industries appears to be biased in favor of using more skilled labor.
Referring to the two perspectives

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