In September 2018, The Wall Street Journal (WSJ) reported that a growing shortage of labor
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In September 2018, The Wall Street Journal (WSJ) reported that a growing shortage of labor in Eastern European countries such as Hungary was driving up wages and reducing business income. The reason for the shortages was a large migration of Eastern European workers to Western European countries. Use the simple immigration model to demonstrate the key ele |
Explanation
According to the immigration model, workers migrate from one place to another in search of higher wages and high-earning opportunities. If workers have migrated from Region EE countries to Region WE countries, they must be receiving higher wages in Region WE countries compared to Region EE countries. Due to this, the labor supply in Region EE countries decreases while the demand for labor remains the same. This, in turn, increases the wage rates of Region EE countries, which is why the wage rate rose in Country H.
Verified Answer
The essential components include:
Relatively higher wages in Region WE countries
Immigration of workers from Region EE to Region WE resulting in decreased supply of labor in Region EE countries
A fall in labor supply increases the wage rate in Region EE countries.
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