A worker in Thailand can earn $12 per day making cotton cloth on a hand loom. A worker in the United States can earn $82 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Question

Reina Lloyd

Business

23 July, 15:28

A worker in Thailand can earn $12 per day making cotton cloth on a hand loom. A worker in the United States can earn $82 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

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Answers (1)

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Renee Mcmillan · Answer 1

The capitalization rate per worker in the US is much greater than in Thailand.

Explanation:

What makes the possiblity for the US citizen to earn more for the same job is their capitalization rate. The US has a much greater capital per worker than Thailand thus, the productivity of labor is much higher.

The workers are paid based on the production rather than personal effort this means, the Thai worker may be more strong and skillfull than US worker as it does it at hand but that, is a problem for the worker as with proper equipment it will make more cloth and therefore more goods are produced more value and a higher wage hourly rate is achieved.