Many People Believe that Wages are Lower in Developing Countries GMAT Reading Comprehension

Reading Passage Question

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.

‘Many people believe that wages are lower in developing countries than in developed countries’ is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension. This GMAT Reading Comprehension consists of 3 comprehension questions.

The GMAT Reading Comprehension questions are designed to test candidates’ abilities in understanding, analysing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solution and Explanation

1. 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.

2. The primary purpose of the passage is to

(A) identify the origin of a common misconception
(B) discuss the implications of a generally accepted principle
(C) present information relevant in evaluating a commonly held belief
(D) defend a controversial assertion against a variety of counterarguments
(E) explain under what circumstances a well-known phenomenon occurs

3. The passage suggests that if the movement of capital in the world were restricted, which of the following would be likely?

(A) Advanced technology could move more quickly from developed countries to developing countries.
(B) Developed countries could compete more effectively for jobs with developing countries.
(C) A country's average wages could increase without significantly increasing the sophistication of its technology or the value of its currency.
(D) A country's productivity could increase without significantly increasing the value of its currency.
(E) Workers could obtain higher wages by increasing their productivity.

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