Comments on: Resource market case study: New York’s manhole covers forged with human sweat and blood… http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/ for students and teachers of AP and IB Economics Sat, 22 Nov 2008 11:29:41 +0000 http://wordpress.org/?v=2.6.3 By: Maren Rackebrandt http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-5707 Maren Rackebrandt Thu, 11 Sep 2008 22:21:15 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-5707 How the workers, and under what conditions, they work there shouldn't exist today. Those are working conditions from the past and are to me not exceptable during this period of time? Doesn't that have to do something with human rights? Because the work they do there is very dangerous and they do not have the equipment that's neccessary for this job. India puts so much income into labor, because it's cheap. The people work for low wages so that the foundries can employ more and more people. The demand for labor would be reduced if the quality of the workers would increase or more money would be invested in other resources. Couldn't # 3 be answered with the production possibility curve? How the workers, and under what conditions, they work there shouldn’t exist today. Those are working conditions from the past and are to me not exceptable during this period of time? Doesn’t that have to do something with human rights? Because the work they do there is very dangerous and they do not have the equipment that’s neccessary for this job.
India puts so much income into labor, because it’s cheap. The people work for low wages so that the foundries can employ more and more people.
The demand for labor would be reduced if the quality of the workers would increase or more money would be invested in other resources. Couldn’t # 3 be answered with the production possibility curve?

]]> By: Drew Venkatraman http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-5077 Drew Venkatraman Sun, 04 May 2008 09:58:38 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-5077 yes. it is smarter for firms to outsource to india for the production of manholes. However, that being said, the comparative advantage is being met and both countries are prospering the only draw back is that for a firm or industry such and NY manhole covers, couldn't they spend a little more money in order to help out my indian brothers? yes. it is smarter for firms to outsource to india for the production of manholes. However, that being said, the comparative advantage is being met and both countries are prospering the only draw back is that for a firm or industry such and NY manhole covers, couldn’t they spend a little more money in order to help out my indian brothers?

]]> By: Alex Goldman http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3598 Alex Goldman Sat, 05 Jan 2008 07:56:44 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3598 Another reason why using cheap labor is more economical than using machines is that workers can be easily replaced. Machines may break, rust, or be outdated which requires either fixing or the purchase of new machinery. Workers, however, if they grow old or tired can be easily replaced by the huge work force. In the production of manholes, workers seem to be the way to go. Another reason why using cheap labor is more economical than using machines is that workers can be easily replaced. Machines may break, rust, or be outdated which requires either fixing or the purchase of new machinery. Workers, however, if they grow old or tired can be easily replaced by the huge work force. In the production of manholes, workers seem to be the way to go.

]]> By: Christina http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3592 Christina Wed, 02 Jan 2008 16:51:54 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3592 1) The relative cost of the labor to the cost of a machine is much, much lower. Hiring 100 workers who can do x amount of work is probably cheaper than buying a machine that does the same amount of work. Labor is so cheap here that it's just not worth getting the machine. 1) The relative cost of the labor to the cost of a machine is much, much lower. Hiring 100 workers who can do x amount of work is probably cheaper than buying a machine that does the same amount of work. Labor is so cheap here that it’s just not worth getting the machine.

]]> By: kxc.024 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3537 kxc.024 Tue, 11 Dec 2007 05:36:46 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3537 In regards to the first discussion question, the reason that the firm hired these Indian laborers instead of buying machinery is because the wage is so much cheaper than the money that will be spent on buying a machine. Although it could also be argued that it'd be more profitable for the firm in the long run to buy the machinery because it can produce a lot more of those manhole covers in the same amount of time, the firm was probably only thinking in the short run. In regards to the first discussion question, the reason that the firm hired these Indian laborers instead of buying machinery is because the wage is so much cheaper than the money that will be spent on buying a machine. Although it could also be argued that it’d be more profitable for the firm in the long run to buy the machinery because it can produce a lot more of those manhole covers in the same amount of time, the firm was probably only thinking in the short run.

]]> By: Helen http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3500 Helen Sun, 02 Dec 2007 16:07:44 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3500 Because the supply of workforce in India exceeds the demand and because it is largely unskilled, the price of labor, or wage rates, are low. And because the price of labor is so low, firms will naturally use more labor than capital for their optimal combination of resources. The firm will know that it's using the right combination of capital and labor in its production when the marginal revenue product of capital divided by the price of capital is equal to the MRP of labor divided by the price of labor. There are several factors that may reduce the demand for labor in the Indian foundries: 1) If the demand for manhole covers decreased 2) If the productivity of the workers decreased 3) If the price of capital (substitute resource) decreased 4) If the price of goggles (complementary resource - hypothetically, as the article says that these safety precautions are practically nonexistent) increased Because the supply of workforce in India exceeds the demand and because it is largely unskilled, the price of labor, or wage rates, are low. And because the price of labor is so low, firms will naturally use more labor than capital for their optimal combination of resources. The firm will know that it’s using the right combination of capital and labor in its production when the marginal revenue product of capital divided by the price of capital is equal to the MRP of labor divided by the price of labor.

There are several factors that may reduce the demand for labor in the Indian foundries:
1) If the demand for manhole covers decreased
2) If the productivity of the workers decreased
3) If the price of capital (substitute resource) decreased
4) If the price of goggles (complementary resource - hypothetically, as the article says that these safety precautions are practically nonexistent) increased

]]> By: KatherineYang http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3489 KatherineYang Sat, 01 Dec 2007 13:46:55 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3489 Labour is cheap in India, whereas capital is much more costly, therefore, a firm would chose to hire more labour to lower costs. In other words, least-cost production. Under that idea, the smart firm would definetly spend more on labour than capital, but humanistically, it's so wrong. But I agree with James, India has a large population and for an Indian firm to use more labour than capital, is definetly beneficial towards Indians as a whole, and to the economy. Labour is cheap in India, whereas capital is much more costly, therefore, a firm would chose to hire more labour to lower costs. In other words, least-cost production.

Under that idea, the smart firm would definetly spend more on labour than capital, but humanistically, it’s so wrong. But I agree with James, India has a large population and for an Indian firm to use more labour than capital, is definetly beneficial towards Indians as a whole, and to the economy.

]]> By: James Tsao http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3464 James Tsao Wed, 28 Nov 2007 14:14:57 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3464 Well, the foul conditions that these Indian workers work in definitely needs to be improved. Jeez, these men are almost naked and they work with burning hot metal every single day... if any accidents would cause tremendous pain i bet. Yet, although the conditions of these factories are bad, the existence of these factories is not only beneficial to the Americans but also to poor Indians despite the poor working conditions. Since the cost of labor is so much lower than that of capital, these factories employ massive labor to achieve the same output. This large input of labor gives Indian men a steady income from the work. So, not only does Americans NEED these factories to produce products at a lower cost, these factories NEED American buyers so its people can get jobs. Well, the foul conditions that these Indian workers work in definitely needs to be improved. Jeez, these men are almost naked and they work with burning hot metal every single day… if any accidents would cause tremendous pain i bet.

Yet, although the conditions of these factories are bad, the existence of these factories is not only beneficial to the Americans but also to poor Indians despite the poor working conditions. Since the cost of labor is so much lower than that of capital, these factories employ massive labor to achieve the same output. This large input of labor gives Indian men a steady income from the work. So, not only does Americans NEED these factories to produce products at a lower cost, these factories NEED American buyers so its people can get jobs.

]]> By: Angel Liu http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3461 Angel Liu Wed, 28 Nov 2007 12:53:48 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3461 Indian foundries use more capital than labor because the cost of capital is more expensive. Say ten workers' productivity is equivalent to one capital's productivity but the total workers' wages are only about 10% of the cost of the capital. So rational firms chose low-cost labor resource over expensive capital resource. However, if technology improvement lower the cost of machinery and Indian gov't impose a minimum wage, firms might employ more capital. What determines the combination of resources is on the resources' marginal productivity over their cost. A least-cost combination is where MP(labor)/ P(labor) = MP(capital)/ P(capital). A firm who wants to maximize profit with the least cost would consider MRP(labor)/ P(labor)= MRP(capital)/ P(labor). Indian foundries use more capital than labor because the cost of capital is more expensive. Say ten workers’ productivity is equivalent to one capital’s productivity but the total workers’ wages are only about 10% of the cost of the capital. So rational firms chose low-cost labor resource over expensive capital resource. However, if technology improvement lower the cost of machinery and Indian gov’t impose a minimum wage, firms might employ more capital. What determines the combination of resources is on the resources’ marginal productivity over their cost. A least-cost combination is where MP(labor)/ P(labor) = MP(capital)/ P(capital). A firm who wants to maximize profit with the least cost would consider MRP(labor)/ P(labor)= MRP(capital)/ P(labor).

]]> By: kevinyeh http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3460 kevinyeh Wed, 28 Nov 2007 12:51:38 +0000 http://welkerswikinomics.com/blog/2007/11/27/labor-or-capital-new-yorks-manhole-covers-forged-with-human-sweat-and-blood/#comment-3460 Yeah, this is pretty ridiculous. I mean morally i guess this is totally wrong considering that we're exploiting cheap labor in India, letting them work in such horrible conditions so that we can live more comfortable lives. But i guess from an economic perspective, this is understandable. In India, the less skilled and thus less "productive" workers receive a lower wage rate, which in turn allows the cost of the finished product to be lower. This is actually GOOD for American society. It is probably cheaper to use labor in India than to buy expensive capital which would increase efficiency in production. Therefore, these firms find it more profitable to utilize this cheap Indian labor than to invest in capital. Yeah, this is pretty ridiculous. I mean morally i guess this is totally wrong considering that we’re exploiting cheap labor in India, letting them work in such horrible conditions so that we can live more comfortable lives.

But i guess from an economic perspective, this is understandable. In India, the less skilled and thus less “productive” workers receive a lower wage rate, which in turn allows the cost of the finished product to be lower. This is actually GOOD for American society.

It is probably cheaper to use labor in India than to buy expensive capital which would increase efficiency in production. Therefore, these firms find it more profitable to utilize this cheap Indian labor than to invest in capital.

]]>