Will the modern sector wage be equal to the traditional sctor wage after markets equilibrate through migration?
- Sipra MLv 69 years agoFavorite Answer
Wage differential always exists and migration will not be able to change it,
* Education and change in education and time involve
*Training and period of training difference and expected rate of return
* Skill acquired
* bargain power of employee and employer.
* changing requirement of the business sector
- simplicitusLv 79 years ago
That depends on your economic faith.
- For many decades, some have believed in the Iron Law of Wages:
- Others argue that wages are a function of marginal productivity
but we know that that isn't true just by looking at wages in the U.S. Clearly the highly paid execs that destroyed their own companies were not very productive.
On the other hand, most worker wages have not gone up with productivity:
- Then there is the supply and demand theory of wages. But in that case, why is the unemployment so large? Evidence is that wages tend to be sticky:
- One of the implications of the Heckscher–Ohlin model of international trade
is that wages should converge even without migration.
but that doesn't seem to be the result we are seeing in the real world either.
My personal feeling is that world is too dynamic to ever reach an equilibrium, so the question makes no sense.