Question

EART N D. PC-World is a U.S. manufacturer of personal computers. The CEO is looking at opportunities for off-shore production. The selection of the country where PC-World will establish a production facility will depend on the following two factors: 1. The local wage in US$ terms; and 2. The rate of unemployment. According to the CEO, a low wage country will give the company a cost advantage, while a high unemployment rate will mean that there are plenty of workers available to work at the manufacturing facility. How would you advice the CEO regarding the use of these two indicators as the selection criteria?

Answer 1

The CEO use offshore production to take advantage of wage gaps between developing and developed nations, keeping prices low and profits high by lowering labor costs. It is a very good strategy to save more money, but it has some issues as wage growth is reduced, the merit people who deserve the high wage could be in loss and also the company will be lack of the qualify people and the priority criteria.

The analogy to the labor markets is that, while the recovery has caused enthusiasm through improvement in many output and labor market indicators, wage growth has been relatively flat. Many seem to expect the decline in unemployment to put upward pressure on the mean wage. The labor market flows of a workforce with a wide distribution of wages, because labor market conditions affect high-wage and low-wage earners differently.

But it also is good for the unemployed peoples even the wage rate is low, they can get a job in a decent company earn money. It can increase its number of employments with low spending and gaining more profit. The selected country may be developed by it.