Are wages in the Unites States too high and need to be lowered in order to compete globally? Right now, in the grip of one of the worst depressions that America has seen in a long time, that is not what frustrated jobless American workers want to hear. But that is exactly what the article “American Wages out of Balance” says about wages in our country. Right now the New York Times article says that in order of America to compete with our more productive global partners (like China, India, and the rest of the Asian nations) we need to lower of wages. As much as I would not like to see wages on average come down in the future, (because I will be entering the job market soon and ever penny will help out in the real world), I do believe it is going to be necessary because of the huge global populations that will be competing for the same job. People in China can make almost the exact same products in factories as American workers, yet we get paid a larger amount. In order for America to be able to contend then we need to bring wages of unskilled factory workers closer to their foreign counterparts. Once wages are equal then companies would be on an even playing field in the Global Economy. Wages are low in developing countries with huge populations but we American do take advantage of higher productivity. In the United States it is increasingly important to get a college education and earn a professional living because in the future unskilled wages and wages of people that can be outsourced is only going to shrink in this ever flattening world.
http://www.nytimes.com/2009/11/11/business/11views.html
Subscribe to:
Post Comments (Atom)
You mentioned productivity in your post. I attribute most of the wage discrepancies in the world to this factor. Productivity is directly related to earnings. Developing countries with lower levels of productivity, India or South Korea, receive lower wages. This is a generalization, but can be applied to the current status of wage stagnation. Globalization, or the liberalization of economies, has been rapidly increasing in recent decades. As these developing nations begin to meet the productivity standard at which U.S. operates, more low-skilled, labor intensive jobs are migrating overseas. This movement contributes, albeit modestly, to wage growth in the developing world while keeping wages flat for the same type of jobs domestically.
ReplyDeleteYes, downward pressure on domestic labor-intensive wages in the U.S. has been happening for over a decade. Concurrently, income disparity within the U.S. has also been growing. Logically, we can assess that the wages of these lower paying jobs have indeed been stagnating. Free trade domestically and liberalization of economies abroad has created a shock to the global and U.S. economies. Labor in the U.S. has already, and will continue, to feel the consequences of globalization. As economists, we know globalization is not a bad thing, but the process of global economic integration will be a long one. It may take decades before substantial wage growth in low-skilled labor starts again.
This comment has been removed by the author.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteI think professional workers are also susceptible to outsourcing. Not only is an unskilled factory worker facing outsourcing issues in the United States but accountants and engineers too. As we see more people from other countries graduate from American universities and colleges, the more opportunity there is for professional outsourcing. Engineers, accountants, and quite possibly some time in the future even lawyers will compete and work on the global level. Companies will hire and they will work from the confines of their own homes (in whatever country they may live in). Lower salaries will be the comparative advantage. Higher salary equals higher costs, which in turn equate to lower profits. Outsourcing reduces this cost and profits increase. The surplus reinvested and thus maximizing the present discount value for lifetime net returns. The same principle applies to a computer firm looking for software engineers. One day, we may even see lawyers facing the same issues of outsourcing that unskilled factory workers face today. I believe companies are global now and so competition for the best worker includes lower wages.
ReplyDelete