Which of the following is a valid counterargument against using tariffs to protect high wages from cheap foreign labor?
1. The economy may become overheated, thus increasing inflation.
2. The benefits of such a tariff policy will go to businesses, not workers.
3. Wage rates in a nation are largely determined by productivity, not trade tariffs.
4. The benefits of such a tariff policy will go to consumers, not workers.
The correct answer and explanation is:
The correct answer is 3. Wage rates in a nation are largely determined by productivity, not trade tariffs.
Explanation:
A valid counterargument against using tariffs to protect high wages from cheap foreign labor is that wage rates in a nation are largely determined by productivity, not trade tariffs. Productivity refers to the amount of output a worker produces per hour of work. When workers are more productive, businesses are willing to pay higher wages because the increased output can generate more revenue. Trade tariffs, while they might initially raise the cost of foreign goods, do not directly affect the productivity of domestic workers or improve the skills and efficiency of the labor force.
Using tariffs to protect high wages assumes that cheap foreign labor is the primary reason for low wages. However, this is an oversimplification. If a country’s workers are not as productive as those in other countries, increasing tariffs on foreign goods might not lead to higher wages for domestic workers. In fact, tariffs could harm the overall economy by increasing the cost of goods, leading to inflation, which would offset any gains in wages.
In addition, the productivity-driven argument suggests that a more effective way to increase wages is through investment in education, technology, and infrastructure to boost the productivity of domestic workers. This would make workers more competitive in the global market and enable higher wages without the need for trade protectionism.
The other options present valid concerns but are not as directly related to the economic reasoning against tariffs. For example, while tariffs may benefit consumers in the short term by protecting local jobs, they can also lead to higher prices for goods, which may ultimately hurt consumers. However, the core issue with using tariffs to protect wages is that they do not address the root cause of wage disparities—productivity.