GMAT Reading Comprehension
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Source: PREP
Level: 3
Many people believe that because wages are lower in developing countries than in developed countries, competition from developing countries in goods traded internationally will soon eliminate large numbers of jobs in developed countries. Currently, developed countries' advanced technology results in higher productivity, which accounts for their higher wages. Advanced technology is being transferred ever more speedily across borders, but even with the latest technology, productivity and wages in developing countries will remain lower than in developed countries for many years because developed countries have better infrastructure and better-educated workers. When productivity in a developing country does catch up, experience suggests that wages there will rise. Some individual firms in developing countries have raised their productivity but kept their wages (which are influenced by average productivity in the country's economy) low. However, in a developing country's economy as a whole, productivity improvements in goods traded internationally are likely to cause an increase in wages. Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.
The passage suggests that which of the following would best explain why, in a developing country, some firms that have raised their productivity continue to pay low wages?
- A Wages are influenced by the extent to which productivity increases are based on the latest technology.
- B Wages are influenced by the extent to which labor unions have organized the country's workers.
- C Wages are not determined by productivity improvements in goods traded internationally.
- D The average productivity of the workers in the country has not risen.
- E The education level of the workers in the country determines wages.