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this post was submitted on 20 Oct 2023
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It means everything when talking about people's pay.
For that you need 2 data pieces:
You then use the second to convert the first into US Dollars so that you compare the Chinese salaries in USD to American salaries is USD.
Merely the second piece of data wIthout the first means nothing if you're trying to compare salaries.
For example, before the Euro the Italian Lira used to have a cross currency exchange rate with the dollar which was thousands of lire per dollar and that didn't mean Italians in the 80s were incredibly poor: because for every dollar the average US worker received in their salary the average Italian worker got thousands of lire, all put together mean they got about 1/2 to 1/3 of a US salary rather that the 1/1000 that by your the exchange rate alone suffices "logic".
By the way, that cross currency exchange rates are meaningless to compare incomes or costs without the actual incomes and prices in the local currency, is really, really, REALLY basic financial knowledge.
You don't need to do this because you only need to look at the fact that those jobs are competed for to see that they are desirable.
Wage parity isn't a meaningful discussion when discussing comparative advantage. Too many other factors come into play.
Okay but you realize that any job would be competitive in situations of poverty right? That's why you need the second data point.
That's specifically why comparative advantage is a good thing - lifting people out of poverty is a good thing.
To fully measure Comparitive Advantages, you must include the differences in manpower costs, which brings us back to salaries (plus, since this is to compare manpower costs, you also need things like the employer-side tax costs such as social security payments), which then needs to be converted to a single currency using cross-currency exchange rates.
Further, every single monetary elements of calculating Comparitive Advantage which is in local currencies needs to go through those cross-currency exchange rates in order to be comparable.
There is no way you can calculate comparative advantage merelly with the single datapoint which is a cross-currency exchange rate because all that tells you is the relation between two units of measurement and says nothing about the actual quantities being measured.
As I said, this is incredibly basic financial stuff.
To give you a really basic non-financial example which hopefully will make you understand it:
What you wrote in your original post is equivalent to saying that "The farm in Britain produces more milk because 1 pint = 1.759754 liters".
You don't know anything about how many pints the British farm produces, or about how many liters the Dutch farm produces, yet you claimed the ratio between two measurement units is enough by let you draw conclusions about production numbers even though you used no prodution numbers.
If I was to bet I would say you've read some articles about how the exchange rate of the Yuan vs USD is kept artificially low to increase the competiviness of Chinese exports, didn't quite understand how it works and still thought you knew enough and applied it were it wasn't applicable and/or in the wrong way.
No I just work in international business and know hy we outsource certain roles.
You keep pretending you know more about this, and you're describing irrelevant things. I took econ/IB in college too, bud. Lots of people do.
Since we're pulling rank, I worked in Finance, specifically the Investment Banking and the Funds industries, some of which being very well know names (Fidelity, Deutsche Bank, even Lehman Brothers back when they still existed), always in the EMEA divisions which, unlike our US colleagues, deal with cross-currency trades all day every day (because EMEA actually means Europe Middle-East and Asia, so it's a lot more than just trades on USD priced assets, for USD books, settled in USD).
So I'm quite familiar with exactly what cross-currency exchange rates mean, and it's painfully obvious that you have absolutelly no clue what you're talking about when you're quoting a cross-currency exchange rate by itself and claiming that alone is proof of comparitive advantage.
Lmao you either didn't work in finance or can't parse simple comments, which is why you no longer work in finance, but nothing I have said is incorrect whatsoever
Best of luck in your career move
LMAO!
Keep digging.
I do genuinely wish you luck, but I'll amend it to "when you graduate" too