Question

Use the neo-classical economic theory to explain whether Silicon Valley's high wages could lead to raise wages for unskilled, low-wage workers in the New York area.

Answer 1

In the neo classical theory wage of the labour is determined by the Marginal product of the labour. It is measured by changes in total output due to one additional unit of labour employment. So neo classical theory is saying that with same abilities and productivity of the employees they all should be paid equal wage.

Now in the silicon valley's labour get high wages because of their high productivity or skill(which leads to high marginal product) but in they New York labour are not going to get same high wage because they are unskilled and have low productivity which will lower their Marginal product. So we can say that Silicon valley's high wages will not lead to raise in the wages for unskilled, low-wage workers in the New York area.