How changes in wages and technology affect employment decisions

At Western Firms Like Adidas, Rise of the Machines Is Fueled by Higher Asian WagesAt Western Firms Like Adidas, Rise of the Machines Is Fueled by Higher Asian Wages
by: Kathy Chu and Ellen Emmerentze Jervell
Jun 10, 2016
Click here to view the full article on WSJ.com

TOPICS: International Trade, Manufacturing

SUMMARY: Global companies, such as Adidas, are doing more manufacturing closer to home thanks to advances in automation and increasing pay demands from workers in the developing world.

CLASSROOM APPLICATION: Students can evaluate the effect of innovation in manufacturing processes (i.e., increased automation), wages in the developing world, and the marketing benefits of manufacturing closer to home on the decision by companies to move manufacturing from the developing world to their home countries.

QUESTIONS: 
1. (Introductory) What is the effect of increased manufacturing in the developing world on wages in these countries?

2. (Advanced) Why is automation critical for companies to move manufacturing from the developing world to their developed countries?

3. (Advanced) What is the effect of increased wages on the mix of capital and labor used in production processes?

Reviewed By: James Dearden, Lehigh University