Workers: The Faceless, Interchangeable Cog

I find it interesting how much people fear wage disparities- such that you always hear about those faceless billions of "third world" drones who'll work for nothing/peanuts:

They tell you that you must compete in the global workforce. Nevermind that there are a few billion impoverished third-worlders out there who can (and will) work for a fraction of what you can survive on. If we are to compete directly against third-world labor, then the only thing we can become is third-world labor. That's competition folks. Become cheaper, or get out of the way.

(emphasis added) My, my, what a stark future. Since we're all interchangeable and equal, I suppose we really do have no choice but to wall ourselves up behind fierce tariff walls and, if necessary, real walls to keep the wogs out and the good jobs in.

But is that true? Are all workers the same? A point that remains unanswered every time I bring it up is that if wages were the be all and end all of labor economics, Haiti would be the industrial capital of the Northern Hemisphere (what with the lowest wages...). Even if you disallowed extant companies from shifting labor or production to Haiti, entrepreneurs would have invested to take advantage of the low, low rates.

Why is it then that Haiti is a basket case of near-autarky, incredibly high unemployment, and nonexistent economic growth? Because Haitian worker productivity is also close to zero, and the costs of doing business in Haiti are immense. The value of a Haitian operation (aside from sugar production, I imagine) most likely doesn't exceed the myriad costs involved. To quote a frequent commenter on American Joblogs.com, "simplistic 2D models are great in text books and on paper, but not in the real world," Dawn.

And that's the problem with the fundamental premise of this labor rate criticism- workers are different, and especially the specific circumstances of time and space that surround a worker all interact to determine how productive the laborer is, such as the capital available per worker, the specialization of the labor (and size of the labor pool), infrastructure, and amounts of human and social capital present in an area.

A person who is in possession of a tool that allows them to do the job twice as fast as the next guy in line is ultimately worth twice as much as the next guy in line- to the employer/productive process. Giving workers better tools means greater production/more profits. Ultimately, productivity is the driver of labor rates, ceteris paribus. Keep supply and demand the same, and labor rates increase with productivity.

Labor dissimilarity is another cause for labor rates to increase. A janitor is not an engineer, and even an engineer is not an engineer given the many, many specialties and subdisciplines. And specialization goes even further, depending on how 'mature' a field is. Whenever a new specialty is created/forged by individuals (of the entrepreneurial bent), you have the tendency to fragment yourself off into a smaller subset of the labor pool. Provided that the labor you've specialized in is demanded, your wages increase.

Network effects and other capital improvements also increase worker productivity. If a factory were one hundred times more productive than its neighbor but for reasons unknown was one hundred times slower in getting its product to market, it wouldn't have much advantage over its competitor. The presence of infrastructure reduces costs and, consequently, makes production in an area more productive (which also increases workers' relative productivity). Having a well educated, civil population with a good work ethic also leads to greater productivity (less waste). Having any of these good things concentrated in areas nearby is yet another boost.

These are the things that make individual laborers different, and why simply looking at absolute wages is close to useless in determing why companies outsource. Its not about "cheap labor," unless the product in question requires no skill, and thus can literally be done by anyone- in which case the problem is that, within the American milieu, there is no place where any combination of capital and labor is profitable.

Continually innovating means new profitable industries and services that can only be done, initially, by the first adopters of the technology. That, is the secret to continued jobs and prosperity, rather than 'protecting' obsolescing or threatened jobs.

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If you are going to quote

If you are going to quote someone, please attribute the quote to the correct person. You quoted Eric, not me.

Also, when you are going to attribute statements, be sure that you can attribute them to SOMEONE. Not a single one of us said that wages are the be all and end all of the game. Haiti is a dangerous, chaotic country. It is an irrelevant example in this scenario, and you are using it as an example BECAUSE it is a dangerous and chaotic country, and you know that it is not going to be a corporate haven for cheap labor. It is an invalid comparison, and you know it.

It is not invalid, and *you*

It is not invalid, and *you* know it. You put up a scenario where all 3rd world labor is considered the same- as you've just admitted, it most certainly isn't.

Given that most of the teeming 3rd world lives in conditions not far removed from Haiti (with the notable exceptions of parts of India, and of course China, which isn't 3rd world though, being 'communist'), the potential pool of competitors drops dramatically.

Is Mexican labor as productive as American labor? Singaporean?

And as far as your quibbles go:

(1) My usage of Eric's quote did not attribute it to you, it was addressed to you.

(2) If labor rates are not the be-all and end-all of the game, why are labor wages practically the only thing talked about in the outsourcing debate?

Haiti? Why would anyone

Haiti? Why would anyone discuss outsourcing/offshoring using Haiti as example? If you want to discuss outsourcing/offshoring, India and China are much more important to discuss. The availability of low wage labor in both countries has attracted the vast bulk of U.S. corporate outsourcing investment. You can visit www.itpaa.org and find numerous examples of how the best U.S. IT jobs are moving to these locations. Wage savings is the major attraction but tax incentives are also part of the decision. There is nothing obsolescent about many of the jobs moving offshore. R&D for IT and biotech is moving to India. Pharmeceutical research is moving offshore. China and India are both ramping up to attract nanotechnology research. This idea that the U.S. will innovate its way into massive middle class job creation has no basis in fact. IT workers in the U.S. can't innovate new software if they are unable to find work in IT. The same is true of people in a variety of other white collar professions who are now losing their jobs to outsourcing.

Here's a link to an article worth a read:
http://straitstimes.asia1.com.sg/commentary/story/0,4386,250144,00.html
"As jobs go global, govts can't afford to sit still" by JOSEPH E. STIGLITZ, winner of the 2001 Nobel Prize for economics

"This idea that the U.S.

"This idea that the U.S. will innovate its way into massive middle class job creation has no basis in fact."

The entire history of the U.S. notwithstanding?!

** slaps your forehad **

When farm jobs gave way to industry, farmers cried out. As manufacturing jobs give way to information and service jobs, factory workers cry out. And yet, all those cries, those dire predictions of privation and poverty, proved false.

As information and service jobs are outsourced, we cry out. Those cries too, will prove false.

In the agricultural age, we couldn't have anticipated industry. In the industrial age, we couldn't have anticipated the information economy. In the information age, WE CANNOT ANTICIPATE THE NEXT STEP.

How can you be so willfully blind to these facts? There is NO EVIDENCE, ZERO, ZIP, ZILCH, NADA, to support the idea that outsourcing will impoverish the US. NONE. Is that not clear? Here, maybe this will help:

THE ENTIRE ECONOMIC HISTORY OF MAN PROVES YOU WRONG, FIGURE IT OUT.

Bah Humbug to Outsourcing

Bah Humbug to Outsourcing Fears
I discovered a fairly irreverent weblog called Catallarchy today. Their opinion on outsourcing impoverishing the US is entirely correct. Like agriculture and industry before it, the loss of information jobs overseas will merely force the American worke...

I think people are speaking

I think people are speaking at cross-purposes here. Outsourcing won't "impoverish the US", if you mean the sense of the entire population suffering. Rather, outsourcing is used to create race to the bottom pressures and play national workforces off against each other.

It's basic econ, morones: If, in a market, you can use mobile capital to force workers to work for lower wages and countries to acquiesce to ridiculous demands, you do it. That's why the initial assumptions of Ricardo, Malthus, et al was that labor would be mobile, information would be mobile and capital would be immobile. Now the opposite is true in every respect.

Haiti being a basket case may have a lot to do with the US strangling it for hundreds of years. After all, the Aristide government was getting favorable responses from various economic institutions before it was brought down by the coup.

As always, various institutional blinders make your discussions meaningless before they begin.

Where is the evidence for a

Where is the evidence for a "race to the bottom"?

And the question stands - if there is any such race to the bottom, why does Haiti still exist? Why would the US "oppress" Haiti if the result is to make them the ultimate goal of capital?

Since were are morones blinded by institutional limitations, please enlighten us.