South-Western College Publishing - Economics  
Give me your tired, your poor, and the ones willing to work for lower wages
Subject Southeast Asian workers are beginning to replace European workers in shipping labor positions.
Topic Labor Markets; International Trade
Key Words

foreign labor, wages, costs, investment

News Story

Under pressure to reduce transportation costs, shipping companies are scanning the globe looking for low-ranked seamen - known as "ratings" - who are willing to work for lower pay and under more extreme conditions than others. Their search is taking them to Southeast Asia and away from Europe, where they had been looking previously.

Given the significant increase in demand for goods from China, and the rebound in shipping volume post-9/11, companies have been struggling to meet demand for their services, looking around both for more ships and more people to run them.

Technical skill is important in this job, but so are sociability, language dexterity, and lack of specific food preference, especially for those working on a ship at sea. In a global industry that currently employs 1.2 million seamen, the Philippines supplies about a third of the labor force. Given their excellent command of English and compatibility with many other cultures, Filipinos have been very popular workers. However, Filipino labor unions have been successful in securing wage increases for their workers, causing firms to seek workers elsewhere. Currently, Filipinos can earn anywhere from $1,100 - $1,500 per month, and Vietnamese workers earn about 20% less than this figure.

Japan has been investing in Vietnam lately: recruiting, training and hiring workers for their ships. Danish shipping firms have been doing the same thing, and the Dutch are in the process of building training sites in Vietnam: A Dutch company signed an agreement with Vietnam's University of Transport to train and recruit seamen.

(Updated November, 2004)


What is happening in the market for Filipino labor to run these ships? Illustrate your answer with a graph of supply and demand.

2. Why did the Filipinos have a comparative advantage in seamen labor?
3. Is the investment in foreign workers seen as a short-run or long-run cost? Why?
Source Margot Cohen. "A New Source of Cheap Ocean Treasure." The Wall Street Journal, 22 September 2004,

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