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Chapter 20: Q. 8 (page 490)

How does the cost of “saving” jobs in protected industries compare to the workers’ wages and salaries?

Short Answer

Expert verified

It costs more to save the jobs than the actual wages.

Step by step solution

01

Step1. Introduction

With the increased globalization, protectionist policies are necessary. Protectionism essentially means the reduction in the volume of foreign trade and putting a cap and check on it.

Protectionist quotas and tariff policies are needed to ensure the survival of domestic players- the manufacturers and producers till the time they are competition ready.


02

Step2. Explanation

Protectionist steps which are taken to protect the domestic players sometimes generate unwanted results. They adversely affect employment and wages of labor in the industries other than the protected industry. The prices in general may rise in the economy and the laborers irrespective of protected industries or other industries see a decline in their real wage.

The cost hence incurred to provide the protection is actually higher than the actual wages and salaries provided to the laborers of the protected industry.

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Most popular questions from this chapter

Explain how trade barriers save jobs in protected industries, but only by costing jobs in other industries.

Why is the national security argument not convincing?

Why do low-income countries like Brazil, Egypt, or Vietnam have lower environmental standards than high- income countries like the Germany, Japan, or the United States?

If trade barriers hurt the average worker in an economy (due to lower wages), why does the government create trade barriers?

Economists sometimes say that protectionism is the “second-best” choice for dealing with any particular problem. What they mean is that there is often a policy choice that is more direct or effective for dealing with the problem—a choice that would still allow the benefits of trade to occur. Explain why protectionism is a “second-best” choice for:

a. helping workers as a group

b. helping industries stay strong

c. protecting the environment

d. advancing national defense
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