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:
(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.