Final answer:
Trade barriers can save jobs in protected industries but can lead to stagnation and lower wages as these industries are not pressured to innovate. This protectionism also lowers average wages across the economy and results in higher prices for consumers, negatively impacting low-wage workers the most.
Step-by-step explanation:
By the early 1970s, the most protected Australian industries tended to have the lowest wages largely due to the effects of trade barriers. Trade barriers, such as tariffs and quotas, can indeed save jobs in protected industries by making foreign goods more expensive and thus less competitive compared to domestic products. This protectionist policy causes a reduction in the exposure to international trade, which can reduce the incentives for these industries to innovate and increase productivity.
This lack of competition and innovation can result in an industry that is less dynamic and where wages stagnate or even decrease. However, it's also important to note that while trade barriers might raise wages within these protected industries, they often result in lower average wages economy-wide. This happens because resources, including labor, are not allocated to their most efficient uses. As a result, overall productivity and economic growth are hindered, affecting income and wages across various sectors.
Moreover, protectionist policies can lead to higher prices for consumers, particularly impacting low-wage workers. As basic necessities like food and clothing become more expensive due to these barriers, low-wage workers experience a decrease in their purchasing power, effectively making them poorer.