Could outsourcing cut US wages in HALF?Submitted by BmoreBrawler on Mon, 05/03/2010 - 17:13
The U.S. economy seems to be on the ropes. A massive trade deficit brought on by an irresponsible central bank and Federal government coupled with microeconomic distortions brought on by those same culprits could plunge us into another Great Depression. However, these artificial problems mask a market phenomena that is potentially just as destructive: outsourcing.
According to Dr. Paul Craig Roberts:
"The enormous untapped labor pools in China, India, Indonesia and the Philippines exceed in size the U.S. population. They are sufficiently large to hold down living standards and wages in those countries until all U.S. manufacturing and information technology jobs have been outsourced in order to boost corporate profits. "
This means that domestic nominal wages have the potential to be cut IN HALF as outsourcing continues. While it is true that prices will fall as labor costs decrease for outsourcing corporations, there is no evidence that real wages will maintain their value.
"In what might be an underestimate, a University of California study concludes that 14 million white-collar jobs are vulnerable to being outsourced offshore. These are not only call-center operators, customer service and back-office jobs, but also information technology, accounting, architecture, advanced engineering design, news reporting, stock analysis, and medical and legal services. "
Will these workers find new employment elsewhere?
"The Department of Labor reports that more than one in three workers who are displaced remains unemployed, and many of those who are lucky enough to find jobs take major pay cuts. Many former manufacturing workers who were displaced a decade ago because of manufacturing that went offshore took training courses and found jobs in the information technology sector. They are now facing the unenviable situation of having their second career disappear overseas."
Suffice it to say, social unrest seems to be in our future.
I can think of three tracks towards addressing this serious issue:
1.Try to stop outsourcing. Use tarrifs or Value-added taxes to promote domestic production.
-Some historians point out that US achieved growth throughout its history even with high tarrifs.
-The only strategy with the potential to keep real wages high.
-Disrupting world trade with a trade war could be disasterous.
2.Try to mitigate the effects of outsourcing. Use H1B visas to make it more appealing to bring labor into the country than outsouce production to foreign nations. At least the foreign workers will be spending money in the US. Lower taxes and regulations to make US workers more competitive and lower the marginal propensity of corporations to outsource.
-Market oriented solution
-Massive immigration via H1B visas would probably occur and lead to even more social unrest.
-Substantial wage loss would still occur.
3. Suck it up and deal with it. Let World Governance deal with the social unrest and create a legitimate one world free trade zone with a one world police force to enforce it.
-Social unrest could be minimized because, well, theres nothing you can do about it! No more us vs them mentality in theory.
-Goes without saying....