Economic Theory
Economic trade theory assumes that countries will specialize and produce the goods they are relatively good at producing. This means a country that once had an equal balance between automobile and textile manufacture will concentrate all of its resources in automobile production if it trades with a country that is relatively better at textile production. While both countries will be better off overall, individual workers can still be hurt. A worker with years of experience in car manufacturing will find his skills are worthless if his country moves to specialize in textiles. The former automobile producer will have to enter the textile manufacturing industry as a low skilled worker. His wages will likely drop since he no longer has valued skills. Wage insurance would alleviate some of the consequences workers in such situations face. The worker's insurance policy would pay him a portion of the difference between his wages as a skilled automobile manufacturer to an entry level textile worker.
Read more about this topic: Wage Insurance
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