Argue With Everyone Political Forums - View Single Post - Is Media Bias An Established Fact Now That Even Harvard Sees It?

Cookie Parker · #12 (**permalink**) 11-11-2007, 11:23 AM

Let's try American wages compared to the world...

Understanding globalization and the reduced wages in AMerica has never been grasped by the right..who listen to propaganda on the subject instead..

Globalization and American Wages: Today and Tomorrow

Quote:

Start with a couple of assumptions about the U.S. economy. Say that the labor force of the U.S. can be divided into workers (those who supply labor) and professionals (those who also supply additional skills, capital, and credentials). Assume further that there are just two sectors in the U.S. economy, call them apparel and aircraft. Workers and professionals can work in either sector. If this sounds unrealistic, remember that this is a story about what matters over a reasonably long period of time. While people obviously do not lose an apparel job on Monday and begin working at Boeing on Tuesday, in the relatively fluid American economy, people do switch across many economic sectors throughout their working lives.

Lastly, assume that producing each $1 of apparel takes a ratio of workers to professionals twice as high as producing each $1 of aircraft—that is, apparel is the more labor-intensive business.

Now, say that falling trade costs (a tariff cut for example) reduces the price of apparel imports. Since domestic producers must compete with imports, this means that the price of domestically produced apparel falls as well. Fewer domestic producers are then willing to make apparel, as falling prices make this a less attractive business. Imports rise to replace this lost domestic production. Lastly, and importantly, aircraft exports rise as domestic investment once ploughed into apparel looks for new opportunities and as U.S. trading partners’ greater specialization in apparel leads them to demand more aircraft from the U.S.

As domestic apparel production contracts, too many workers are displaced to be absorbed in the expanding aircraft sector at the going wage for workers. Remember that the ratio of workers to professionals was higher in the apparel sector, so each $1 of apparel production abandoned releases “too many” workers relative to professionals to be absorbed by a $1 increase in aircraft production. Even after absorbing all of the professionals released from the declining apparel sector, there will still be many former apparel workers not finding work in the aircraft sector at the going wage.

If these unemployed workers want a job, they must agree to a wage cut. Further, it is not just the unemployed labor that takes a wage cut—it is all workers economy-wide. Any incumbent worker in either aircraft or apparel not agreeing to this wage cut would be replaced with those unemployed workers. The process works in reverse for professionals, with the apparel sector not shedding enough of them at the going professional wage in order to meet the demands of the expanding aircraft sector. This imbalance bids up professional wages.

Essentially, by changing the structure of what an economy produces, globalization changes the relative demand for different kinds of labor, skill, and capital. In the example above, globalization pushed the domestic economy into demanding fewer workers and more professionals by tilting the structure of domestic production away from labor-intensive apparel and towards professional-intensive aircraft.

The most well-known outcome of this process is that the gross gains for professionals outweigh the gross losses of workers, hence the national economy sees net gains from trade.2 It is these net gains (which are much smaller than either the gross gains or gross losses) that constitute the argument in favor of global integration. However, it is (obviously) the gross losses that worry many workers about globalization, and this fear is utterly rational in light of economic theory.3

It should be noted that the (slim) majority of U.S. imports come from countries that are not that much poorer than the United States. This sort of trade (call it rich/rich trade) is not necessarily inequality-inducing in the way described above. However, a significant (and the fastest growing) portion of U.S. trade is with nations that are significantly poorer than the United States, and as such, the scenario sketched out above is (and should be) a real and growing concern to U.S. workers.

And so it has been...cut backs in wages, benefits and the influx of illegals Bush has by keeping our borders unprotected allows the disparity between rich and poor to grow as the American middle class vanishes.