In other threads it has been discussed how to get the Economy Stimulated. I have been arguing that one of the underlying issues is Offshoring and "Free Trade"
The above article poses an interesting commentary on Free Trade and it's downsides, especially for the US.
"When the United States trades semiconductors for Asian T-shirts, that is trade in the old-fashioned sense, in which both countries plainly benefit. "But when U.S. companies build semiconductor plants and R&D facilities in Asia rather than in the U.S.," Gomory and Baumol write, "then that is a change in productive capacities ... and there is nothing in either common sense or economic theory which says that improvement in the productive capabilities of other countries is necessarily good for your country."
Trade economists acknowledge that Gomory and Baumol's framework is correct; it actually builds on theories that have been quietly kicked around since at least the 1980s. But they're skeptical as to whether governments are competent enough to do anything about it. Gomory and Baumol's research suggests that the net impact of trade with developing countries tips to negative when the average wage of the country we're trading with rises to one-fourth or one-third of the average U.S. wage. The size of the trading partner also matters, they say; we get into losing territory earlier when the partner has a large population. Sound like any countries you know?
Since I am in the software industry and telecommunication industry I have a keen sense of Software jobs being offshored. The Average Salary for a Senior Indian Software developer is 500,000 Rupees . At an exchange rate of 1 dollar =48.63 Rupees, this means that the average Senior Indian Software Designers work for ~10,000 dollar US per year.
In China, the average manufacturing wage was $.57 per hour worked in 2002, probably not much more now for about $1000 a year in salary based on 2000 hours per year worked.
The US Minumum wage is $6.55 per hour. Higher in some locals due to state/city laws.
Based on 2000 hours of work per year this is equal to 13,110 dollar anually.
The above suggests the question how do we keep the USA and other "developed" countries growing and stimulated when Free Trade and the Communications industry allow for the Offshoring of leading edge economic drivers and skilled staff, along with manufacturing to countries whose workers earn less than the minnimum wage in the US.
I have argued that the US needs to either devalue the dollar or impose Protectionist policies to preserve US workers. Otherwise, the US is going to continue to lose jobs at a catastrophic pace. Gradually these policies could be rolled back to allow for a more streamed free trade implementation.
The US cannot compete with other countries and workers whose value makes it attractive to multinational companies to dump higher cost workers in the US for equally trained workers in developed countries. Executives such as Steve Balmer and IBM's CEO have argued that we need more math and science skills for training US employess, but how does incurring extra costs and going to college help a US worker that is going to get beaten out by a person in a developing country that works for less than a burger flipper at McDonald's?