One of the most common fear concerning free international trade is that jobs in high wage countries (like the US) will be lost to low wage countries (like Mexico). The way the argument usually goes is that workers in some places lack the political power or union organization to get higher wages. This assumes that employers can pay their workers more, but do not. Senator Chuck Schumer and Paul Craig Roberts recently advanced this kind of reasoning.
Real wages do not derive from political power, but from labor productivity in producing goods and services. Labor in many third world countries is not cheap, it is expensive per unit of output. Labor productivity in high wage countries is, as we should expect, very high. The per unit labor cost of many US products is actually lower than in many third world countries. Paying a US worker 10 times as much as a foreign worker is a bargain when that US worker produces 11 times as much. Also, increased specialization of labor through international division of labor generally leads to increased worker skills, higher productivity, and ultimatly a rising living standard for all workers. Not only does each country start out with a comparative advantage in some areas, these advantages develop over time, provided that politicans like Chuck Schumer do not limit trade.
