Answer to Question #68728 in Macroeconomics for SG

Question

How does ending nationally negotiated wage rates encourage industrial expansion in regions of high unemployment?

Answer 1

If minimal nationally negotiated wage rate is expected to be paid in all the country, this decreases investment attractiveness for entrepreneurs. The costs of production are high.

In regions of high unemployment requested wage is comparatively low. People agree to work for minimal salary. With this element being low in the production costs, this stimulates industrial expansion in regions of high unemployment.