The passage suggests that which of the following would best explain why, in a developing country, some firms that have raised their productivity continue to pay low wages?

Wages are influenced by the extent to which productivity increases are based on the latest technology.

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Wages are influenced by the extent to which labour unions have organized the country's workers.

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Wages are not determined by productivity improvements in goods traded internationally.

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The average productivity of the workers in the country has not risen.

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The education level of the workers in the country determines wages.

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Solution

The correct option is D The average productivity of the workers in the country has not risen.
It is given in the passage that ‘but kept their wages (which are influenced by average productivity in the country's economy) low’. Hence even though productivity has risen, wages remain low because the nation’s productivity has remained low as a whole. Hence option (d) is the answer.

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The Taft-Hartley Act, passed by the United States Congress in 1947, gave states the power to enact “right-to-work” legislation that prohibits union shop agreements. According to such an agreement, a labour union negotiates wages and working conditions for all workers in a business, and all workers are required to belong to the union. Since 1947, 20 states have adopted right-to-work laws. Much of the literature concerning right-to-work laws implies that such legislation has not actually had a significant impact. This point of view, however, has not gone uncriticized. Thomas V. Carroll has proposed that the conclusions drawn by previous researchers are attributable to their myopic focus on the premise that, unless right-to-work laws significantly reduce union membership within a state, they have no effect. Carroll argues that the right-to-work laws “do matter” in that such laws generate differences in real wages across states. Specifically, Carroll indicates that while right-to-work laws may not “destroy” unions by reducing the absolute number of unionized workers, they do impede the spread of unions and thereby reduce wages within right-to-work states. Because the countervailing power of unions is weakened in right-to-work states, manufacturers and their suppliers can act cohesively in competitive labour markers, thus lowering wages in the affected industries.

Such a finding has important implications regarding the demographics of employment and wages in right-to-work states. Specifically, if right-to-work laws lower wages by weakening union power, minority workers can be expected to suffer a relatively greater economic disadvantage in right-to-work states than in union shop states. This is so because, contrary to what was once thought, unions tend to have a significant positive impact on the economic position of minority workers, especially Black workers, relative to White workers. Most studies concerned with the impact of unionism on the Black worker’s economic position relative to the White workers have concentrated on the changes in Black wages due to union membership. That is, they have concentrated on union versus non-union groups. In a pioneering study, however, Ashenfelter finds that these studies overlook an important fact: although craft unionism increase the differential between the wages of White workers and Black workers due to the traditional exclusion of minority workers from unions in the craft sectors of the labour market, strong positive wage gains are made by Black workers within industrial unions. In fact, Ashenfelter estimates that industrial unionism decreases the differential between the wages of Black workers and White workers by about 3 percent. If state right-to-work laws weaken the economic power of unions to raise wages, Black workers will experience a disproportionate decline in their relative wage positions. Black workers in right-to-work states would therefore experience a decline in their relative economic positions unless there is strong economic growth in right-to-work states, creating labor shortages and thereby driving up wages.

Which one of the following best describes the passage as a whole?

China's position as the "factory of the world" could be under threat as widespread calls to increase workers' wages in the face of rising inflationary pressures push factories to consider relocating outside the country, analysts said. The direct impact on the petrochemicals sector was relatively minor, though calls of wage hikes from sectors such as the electronics and consumer goods that attract scores of migrant workers would compel manufacturers to relook their business models.

A few cities in China have already begun to raise minimum wages, with many more cities and provinces to follow suit in the coming weeks, amid concerns that factory owners in China were underpaying their workers. In China's southern manufacturing hub of Shenzhen, the local labor department recently announced that it would raise minimum wages by 10-22% to Yuan (CNY) 1100 ($161) per month from July 2010, while the Beijing municipal government earlier announced a 20% rise in the minimum wage in the city to CNY960 a month.

"We expect the forthcoming wage increase to be around 20% in most provinces and cities?" said Jun Ma, chief economist of the greater China region at Deutsche Bank in Hong Kong. An increase in wages may cause a big dent in the cost of doing business of downstream industries that are more labor intensive such as textiles and toy manufacturers, analysts said. "Workers' salaries in these smaller downstream factories make up 10-15% of their costs so any enforced increase could push them out to cheaper countries like Vietnam, Bangladesh, Sri Lanka and India," said Danny Ho, a petrochemical analyst at brokerage firm Yuanta Securities.

A 10% wage increase in low-end, labor-intensive sectors including apparel and electronic components could push up China's consumer price index (CPI) by 0.4% and reduce employment by 700,000 jobs, Ma of Deutsche Bank said. "At the sector level, electronic components, apparel, furniture, and auto parts are most obvious victims of wage inflation," he added.

Foxconn, which manufactures products for companies such as Apple and Dell, has been criticized over its labor practices after a number of suicides at two Foxconn facilities in southern China. The company's recent move to increase the wages of its workers came amid continuing signs of worker unrest in southern China. Officials in China are very concerned about the social impact of the strikes and are placing pressure on low-end manufacturers to raise wages, Ma of Deutsche Bank said.

Recent comments from Premier Wen Jiabao on improving "social justice" would also imply that the government was looking at more aggressive measures to improve the wages of low-income workers in China, he said. "The faster-than-expected labor cost increase has now become a political imperative," Ma added. Rising labor costs in China in the long term would help change the country's manufacturing mix and upgrade its economy, analysts said, adding that it would also help reduce the income gap in the country.

Q45. An increase in wages by 20% by the government might lead to

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