Paying people a decent wage may not be just a humane thing to do; it may be the key to jump-starting our ailing international economy.

The logic goes like this. The economic slowdown hit the U.S. hard, which is causing the demand for goods to drop. Countries like China and India are struggling to fill the gap by trying to increase domestic demand for the goods manufactured in their respective countries. By establishing a healthy minimum wage in these countries, people will be able to buy more and, thus, keep the engines of industry moving smoothly, despite the lull in demand from the West.

Global asset manager and author Richard Duncan is a key proponent of this "trickle-up" theory. As Newsweek reports:

Duncan, now a partner at Blackhorse Asset Management in Singapore, believes that kind of government intervention — undertaken within Asia or imposed by the U.S. via import tariffs for any nation not following set minimums — is more important today than ever, as the region's deep pools of labor effectively thwart the market from pushing up wages fast or far enough on it own.

Convincing Asian governments to dampen what they believe to be their biggest business advantage — low wages — won’t be an easy task. Instead, movement towards this goal may come externally, with the new Obama administration keen to negotiate trade agreements with higher labor standards.

It’s still not clear if this theory will actually work. A Global Envision post from earlier this month discussed a New York Times editorial that argued that trade agreements that push for higher wages will force factories out of business, causing their employees to take even less palatable jobs.

So who’s right? Will raising wages help or harm the millions of factory workers across the world?

Sweatshop labor. Photo: Marissa Orton (flickr)

New York Times columnist Nicholas Kristof wrote a piece this week that turns the conventional wisdom about sweatshops on its head.

Kristof sympathizes with those who do not like sweatshops and certainly does not want to see sweatshop-like conditions become the norm worldwide, but he points out that, in underdeveloped countries, sweatshops are often the most promising economic opportunity available. Particularly in times of economic distress, "one of the best hopes for the poorest countries would be to build their manufacturing industries." While anti-sweatshop campaigns are well-intentioned, in Kristof's opinion they end up destroying opportunities for the very people they attempt to protect.