Answer to Question #98339 in Macroeconomics for annie

Question

What are the factors that make labor cheap in a country? What are the possible bad and good effects of the decrease in wage levels in a country? And What are the factors that increase the company’s revenue from its sales?

Answer 1

The price of labor, like other other resources, is inversely dependent on the amount of labor on the market.

A decrease in wages leads to staff turnover, a decrease in the purchasing demand of the population, a decrease in the level of well-being of the population, but a decrease in the cost of production of the manufacturer. An increase in wages leads to an increase in household incomes, but at the same time to an increase in inflation and production costs, which adversely affects the market position of the product. To increase income and profits, the company must help increase production productivity.In turn, productivity is the most important characteristic of labor. With an increase in the level of labor productivity, its cost decreases, since now most of the work is performed by smart mechanisms, because it will be cheaper than the maintenance of workers.