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Low wage trap

A term that describes the situation in which the average worker in a labour market increases his/her work effort which leads only to little or even no increase in take home income. Many developing countries experience such a low wage trap as the average wage increase gets stalled after reaching a certain point and never quite makes it to the level of the developed nations.

There are many factors affecting the low wage trap but one of the most important reasons is that many developing countries overly rely on outsourcing instead of building up their own global brands with technology innovation.

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