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Americans’ Wages are High Because Americans’ Productivity is High

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Here’s a letter to the Wall Street Journal:

Trong Bui warns that “we cannot afford as a country to abandon the low-margin/low-tech manufacturing businesses to other countries as Mr. Kessler and others have been advocating. Many Americans are not cut out for designing high-margin microprocessors. Where would they find jobs if the U.S. follows the ‘we’ll design (high margin), and they’ll manufacture (low margin)’ paradigm?” (Letters [2], Oct. 12).

To see the error in Mr. Bui’s warning, imagine if someone 150 years ago had warned that “we cannot afford as a country to abandon the low-margin/low-tech agricultural tasks to mechanical innovations as Mr. Cyrus McCormick and others have been advocating. Many Americans are not cut out for designing farm equipment and working at other non-farm jobs. Where would they find jobs if the U.S. follows the ‘we’ll do higher-margin production, and let machines do low-margin farm tasks’ paradigm?”

The very fact that nearly all Americans today command wages that make it unprofitable for firms to employ them to perform low-margin manufacturing tasks implies that nearly all Americans today have employment options that are superior to jobs in low-margin manufacturing. In other words, the relatively high wages that even the lowest-skilled American workers of 2018 command is proof positive that these workers are indeed cut out for jobs better than the low-margin ones now prevalent in developing countries.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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