CHEAP LABOR REPLACES EXPENSIVE LABOR LIKE PHENOMENA: GRESHAM'S LAW vs. COST REDUCTION

Gresham’s Law asserts, “Bad money drives away good money.” For some obvious, and some not so obvious reasons, there are a few prerequisites that must exist for this law to hold. Essentially, Gresham’s law is construed as being the concept of cheaper substitute replacing an expensive option, provided of course, that there is no erosion in the objective to be accomplished and effectiveness of the overall enterprise is not compromised in any manner. Illustrations from workforce domain seem to suggest, “Cheap labor replaces expensive labor.” Similarly, illustrations from the field of education, food, music, art and a few other divergent domains seem to mirror, broadly speaking, Gresham’s law dynamics. However, a closer examination of these illustrations reveals that more often than not, the phenomenon is driven by cost reduction initiatives rather than Gresham’s Law dynamics.