Question

In the practice of international trade, both physical resources and capital cross international borders rather freely, whereas labor is heavily restricted. In fact, it can be extremely difficult for individuals to obtain permits that allows them to be gainfully employed within many countries. Thus, although companies are free to set up production in markets where labor is cheap, labor cannot move to markets where wages are higher. Some argue that this locks poor people to their poor geographies and gives them little hope for advancement. Why do you think this situation prevails? Is it ethical that of all the components of production, labor is the one most subject to restrictions on its international mobility? Why or why not?

Answer 1

This situation prevails because if all labor migrate to regions with higher wages then labor supply increases tremendously in those regions causing the age rate to fall . Countries do not allow this to safeguard the interest of their native citizens . This restriction allows the citizens of those countries to enjoy the higher wages and also countries can take strategy of out sourcing work to low wage regions .

In the country's perspective it is ethical because each country's government will always try to safe guard the rights and interests of its own citizens first . A sudden inflow of labor with static demand will cause unemployment and may throw some existing workers into the unemployment pool . With rising unemployment levels in such countries with higher wage , other problems like crimes rate increase , fall in aggregate demand etc creep up .