I was having a conversation at work and somehow we got onto the topic of cheap overseas labor. (I remember now, it was in response to Trumka’s nationalistic position on outsourcing.) I made a comment to the effect of maybe Trumka should ask himself why jobs are being outsourced overseas. My co-worker said because of cheap labor. How does one address the concern that so many “liberals” have about cheap labor and the fact that they don’t have any benefits? I did point out that oftentimes, if not always, they are getting paid more than they otherwise would by local employers. I also should have said that no one is forcing people to work for these companies and that companies do not owe their employees benefits unless it was agreed on upon hiring. Couldn’t one also make the argument that medical benefits and the like increase the costs of those services over time? Not only that, but isn’t the fact that people get their health insurance through their employers and not directly through insurers one of the big problems in this country?
Making the case that overseas workers are better off is easy. They wouldn’t be taking the job if they weren’t. We nominate for sainthood those who go to empoverished countries and offer a few months of food to stave off starvation.
Entrepenuers who go over to the same places and offer compensation adedquate not only for ongoing food, but also enough for shelter, clothing, and medication in exchange for basic labor receive no such acclaim, but a case can be made that they are far more helpful.
Work conditions and compensation in many places look bad compared to the U.S. and Europe, but they are better than starvation. We must also bear in mind that the median global income is $1700. Half the world makes less than that. We are pretty blind to that fact.
They don’t understand supply and demand. Pure and simple. Their whole economic thought process is wrong for this topic. Wages are a function of productivity, which is mostly a matter of how much capital a worker is sitting on. There isn’t some local “wage rate” that could be higher or lower in a place. If a worker is ten times as productive, then he will be worth ten times as much. The problem with “low wage countries” is that they had socialism in recent decades so there isn’t as much capital per worker as there is in the US/Europe/Japan. Real wages grow because of capital accumulation. And wages are always directly (not inversely) proportional to the profits of capitalists.
It does not make sense to say that jobs are outsourced because workers in poor countries have fewer “benefits”. Benefits are not a free lunch, it is important to always consider this in a world of supply and demand. If safety measures make a job 5 Dollars “nicer”, then workers there will receive 5 Dollars less via supply and demand. In other words, they pay for every measure, every law, every “benefit” they receive. In that sense regulation merely forces employees to buy a product they might not want. In a free market, once it becomes cheaper for the capitalist to buy a fan than to pay people to work in a sweatshop, he will provide one. If unions or the government force employers to provide benefits, they merely drive down wages accordingly. They do not create any additional wealth for workers.
As for “sweatshops”, yes they have crappier conditions than we do in the US, no doubt about it. But every job is only a potential improvement for the worker. If it is not a improvement then they would not work there. Working in a sweatshop beats rural poverty by a long shot. It is not true that we created the poverty that forces them to work under those conditions. And if these countries hadn’t attempted socialism, they would not be so poor that people had to work in sweatshops.
The Division of Labor is World-Wide
That ought to get you started. The fact is your initial instinct is correct…it is often times the taxes and regulations and red tape that make outsourcing cheaper. Sure you might be able to find instances where even after all other factors are controlled for the labor is still cheaper, but really think about it. Where do the vast majority of our imports come from? China…
"There are plenty of areas in the world where labor is much cheaper than in China, but that export nothing. The real key to China’s success is economic freedom.
China is communist in name only. People living under true communism are not productive. Did we import any manufactured goods from the former Soviet Union? Of course not. China is set to overtake Japan as America‟s largest creditor. Did we borrow any money from the Soviet Union? No, in fact we lent it money every year. We had to give it credits just to buy our grain. China exports grain."
-(from Crash Proof 2.0)
Peter Schiff also points out a little history:
"[Years ago] not only did America have a reputation for quality, but it was known for low prices as well. European imports were perceived as high-priced. The word imported was almost a synonym for expensive. Being able to afford imported products was a sign of success, a status symbol. A shopper’s observation that an item seemed expensive would be met with the explanation, “It’s imported.” Today, that would answer the question, “How come it’s so cheap?” So while at one time America flooded the world with low-cost, high-quality goods, today it is a high-cost producer with a reputation for poor quality.
What’s significant, though, is that when America was the low-cost producer, it also had the highest wage rates in the world. It is a common misconception that low wages are the main factor influencing prices. The reality is that low capital costs, and the absence of taxation and regulation, are far more important. When Americans saved a lot and we had sound money, real interest rates were naturally very low. That meant lower capital costs, which allowed greater worker productivity. With very low taxes and minimal regulation, American manufacturers could pay the world’s highest wages while they produced the world’s lowest-priced goods. Today, the high-quality, low-cost producers are all in Asia. Some countries like China have wage scales lower than those in the United States, while others, such as Japan, pay higher wages.
However, the real difference is that costs of capital are lower because of higher savings rates, lower taxes, and fewer regulations. It sounds surprising, but in “communist China” entrepreneurs have more freedom than they do in America. It is far easier to go into business there than here. Think about all the rules and regulations American businesses have to deal with. How can we compete with nations that don’t impose those excessive burdens? Does anyone think that the United States could ever have become a great power with all the rules, regulations, and taxation that exist today? Could we really have actually settled the West if wagon trains had to meet onerous government safety standards and if employers had to deal with all the regulations that are in effect today, had to withhold taxes, and had to keep track of their expenses to pay their own income taxes as well?"
And seriously think about the cost of outsourcing. Depending on the industry, how in the world could it be so cost effective to go through all the trouble of dealing with a country halfway around the world, and dealing with the language and the culture mix and hassle and paperwork of setting up a foreign arm of your business, just to hire people who will work for less? And that’s not even considering the shipping cost of whatever you’re doing. How in the world could it possibly be more economical to make something literally on the other side of the world and then ship it all the way back? There is no way a wage gap accounts for that. If it were just “cheap labor”, outsourcing would more often than not be a losing venture.
And you’re right about the wages being higher than anything else they could get. A few months ago I saw this CNBC documentary on Ford (full episode here)…they confirmed that a workers at a Ford plant in India are paid 4 times what their equivelent peers are paid anywhere else in the area.
Again, the arguement that both parties involved in outsourcing labor are better off is easy. If you don’t believe me, ask them. Or consider the reverse scenario. If you found out that Japan was outsourcing production of microchips to your town, you’re response would correctly be “woohoo!”
In any exchange, it must be logically assumed that both parties are expecting to be better off than they were before. This does not mean that they are proportionately/equally better off. This does not mean that all projections or expectations of the future will hold. This does not mean that all other non-related parties are better off either.
The more philosophical arguements stem from A & B parties are better off from their exchange but party C is worse. Businesses and foreign labor are better off from outsourcing. That does not mean that existing labor in the U.S. is.
This is not very useful in debate against egalitarian statists who use terms like “living wage.”
Leftist response: “Yeah, but they have to abide by our labor and wage laws…we know Americans aren’t going to get exploited if a plant is opened here because we have all the regulations in place that protect workers and make sure they are treated well and paid fairly. That’s the whole point…they don’t have any such things in these other countries.”
Exactly what side are you arguing for again?
this should be such a simple questino and the fact that some people object to the practice on humanitarian grounds is disgusting to me. Think about this for just a moment. Would you take a job unless you had a better alternative to that job? Of course not. Now imagine what conditions you would have to live in if you took those terrible jobs? Those who want to prevent those conditions from arising want to keep those people in poverty in more dire than they would have been. It’s fallacious to the extreme and stupid.
I’m free market of course. Just pointing out the other side’s arugments which we are likely to encounter. You did much the same above.
The toughest arguements to argue with IMO in regards to free trade and open immegration are those where they project the US labor pool as a special interest unto itself. Free flow of labor and resources will result in an aggregate increase in production and wealth. That doesn’t guarentee that YOU specifically will be one of the ones benefitting. Labor guilds suck, but not for the guild members.
I’ve argued with some who suggest that keeping labor an artificially scarce resource in the U.S. will benefit the existing labor. Same arguement goes for keeping only American made products within American markets. This is untrue, but there are enough grains of truth in there to make an persuasive arguement.
So if you admit that your points are easily countered, why do you contend that that’s the easiest way to address the objection?
I didn’t. Just pointed out the arguements and counterpoints he is likely to receive.
Keynes is easily countered. It doesn’t mean he’s no longer encountered.
Thanks all for the responses. It is difficult to argue with people, as John James says “egalitarian statists”, because their expectations are unrealistic and contradictory.
More then that, it’s all based on emotion. A proposal is not really judged analytically, but judged on whether it sounds fluffy. If your proposals sound “mean” at first glance they must be wrong.
“More then that, it’s all based on emotion. A proposal is not really judged analytically, but judged on whether it sounds fluffy. If your proposals sound “mean” at first glance they must be wrong.”
I was going to say it was very emotional, but I wanted to be charitable lol.
We actually had a thread about this a while back. To get to the root of it, I actually think Tom Sowell has the answer…
John James: In contrast to Thomas Sowell’s “A Conflict of Visions,” I recall George Washington once saying, to paraphrase, that men would not require government if men were angels. It is interesting that the Constrained Vision wants less government and the Unconstrained Vision wants more government. It would seem that those of the Constrained Vision, according to George Washington, would want more government to check the flawed, or Constrained, nature of man (to correct it). It would seem that those of the Unconstrained Vision, according to George Washington, would want less government since man requires no check to (correct) his nature.
I am one who believes in the Unconstrained Vision of man. I am also one who believes man is capable of a Natural Order. However, I believe that to achieve a Natural Order, man necessarily must achieve the Unconstrained Vision. It is because man sees himself as constrained by his nature that he necessarily seeks the power of government. The existence of government is a reflection of the Constrained Vision. Were a natural order to exist, it would be a reflection of the Unconstrained Vision of man. A society free of aggression, a natural order, would be a society were the unconstrained vision of man would be reflected in his nature.
Have you read the book?
I have indeed read the book. I have read all three in the series: The Search for Cosmic Justice, A Conflict of Visions and The Vision of the Annointed. However, I believe Thomas Sowell’s argument relies too heavily on the presumption that the logic of the Constrained and Unconstrained Visions as being valid and/or sound. I understand that proponents of the Unconstrained Vision do not worry about the size and scope of government if man, being noble and perfectable, can do no wrong. I understand that the proponents of the Constrained Vision see government as a necessary evil to protect the good from the evil. However, I believe BOTH visions to be in error. If man is constrained, then a natural order is impossible in my view because the existence of government is a reflection of his constrained nature. If man is unconstrained, then a natural order is possible in my view because, like George Washington said, what need is there for government if men are angels.
I contrast the government with the free market. One is constraining and the other unconstrained. One is zero sum and the other positive sum. Postivie sum meaning cooperative and Zero sum meaning competitive. While there is some competition in the free market, it works only through cooperation. Government is strictly competititve. So, the existence of government is a reflection of the constrained nature of its populace. If a natural order is to be implemented, man must be capable of being unconstrained (noble, good, cooperative, etc.) If man is strictly constrained in his nature, incapable of being unconstrained, then I don’t believe a natural order is possible (but I would be wrong because we have knowledge of instances were natural orders existed in history.) I believe man has the potential to be unconstrained (meaning he does not desire government because he sees it for what it is coercion). There is nothing good, noble or cooperative about coercion.
What constrained individual could possibly believe that men are capable of cooperating to the mutual advantage of each? He would have to be unconstrained to do that because what is mutually advantageous through cooperation is good and noble, or be it, unconstrained.
What I meant to say there was that fewer “benefits” do not make a country cheaper to produce in. The worker pays the cost for any benefit he receives, and thus it could not have been politically mandated benefits that raised his conditions. His wage was raised by higher productivity, and benefits (both politically mandated and compensating differentials) came at the expense of wages. I.e. it’s wealth we already have, and statists merely force us to buy something with lower utility than we would have preferred.
Poor countries are not “low wage” because they receive fewer benefits and because working conditions are bad, but because they are less productive. (Because there is less capital available per worker.) Everything else being equal, an American worker could easily compete with a Chinese worker who receives a tenth of the wage, because the American can produce ten times as much. The reason so much employment is outsourced to the former second world is that we have higher taxes in the west (also due to the belief that benefits we receive “for free” through taxation are a free lunch). To earn 50k you actually have to have a marginal value of 80k. And secondly because poor countries were deliberately kept out of the world economy until recently (e.g. communism in China and Russia, protectionism in India), and thus people there are hugely undervalued compared to their potential productivity. They were in effect banned from working. Finally letting these people produce to their full capacity may “take away” some low-end jobs in the US, but it creates additional goods and services that can only make us richer.
The third reason is regulation, such as environmental socialism. We pushed much of the wests industrial production to places that have less regulation, in the belief that regulation has no opportunity cost. The dynamics of environmentalism are similar to that of labor laws: Any benefit is not a free lunch but only comes out of the wealth that we would have either way. It merely forces us to “buy” a product that statists with a nature-fetish prefer, but that has lower utility than the alternative for the rest of us (e.g. more health care). Environmental improvement would naturally happen as it becomes the good with the highest marginal utility for people. Environmental improvement is not a result of regulation, but of wealth.