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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

Do the rules of international trade require that all nations impose the same consumer safety standards?

What are some ways that governments can help people who lose from trade?

Explain how a subsidy on agricultural goods like sugar adversely affects the income of foreign producers of imported sugar.

Explain how trade barriers raise wages in protected industries by reducing average wages economy-wide.

Why would countries promote protectionist laws, while also negotiate for freer trade internationally?
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