There are two very important economic truths to remember here. First, the high-wage "developed world" does not have a monopoly on brilliant people; there are some stunningly smart people living where the cost of living is much less than it is in high rent districts like Sillycon Valley, NYC and London. (Ziggy's Corrollary to Joy's Law: most of the smart people live somewhere else, too.)
Second, the kinds of jobs that are subject to wage arbitrage are commodity jobs -- not the kind of rewarding, high wage jobs that really need someone talented, but the kind of jobs that need a warm body with a pulse to wrestle with the computer until something works. These jobs used to be here, and they were crappy jobs here. When I worked in NYC, these were the kinds of jobs where immigrants would toil away for less-than-market-rates doing busy work because, well, no one capable would do them. (The only prospect for advancement here was for the "manager" who was responsible for ever-larger teams of "programmers" and billed the client for ever-larger sums.)
Here's some food for thought
What's getting outsourced? The IT equivalent of coal mining jobs. My undergraduate degree is in metallurgical engineering and I've spent some time in mines. Its dirty, but high paying work that doesn't require much formal education. People love it. But its also subject to lots of ups and downs and over the years had steadily declined.
My prediction is that while hundreds of thousands of IT jobs will go off-shore in the next decade, we'll gain more than we lose as we move up the hierarchy. We do a poor job of meeting demands at the top of the hierarchy and there's plenty of work to do. When you think about the real problems that IT should be solving, its amazing how little attention we pay to them.
-- Phil Windley on IT's Coal Mining Jobs
The project “uses natural-language understanding” which, last time I checked, more or less amounts to being able to pass the Turing test, which a bunch of the smartest people in the world at MIT and Stanford and so on have notably failed to do, and it seems just a little unlikely that this bright shining goal can be offshored to wherever the cheap programmers are this year.
-- Tim Bray on Offshore BS
If I had a googlable copy of Future Shock handy, I'd point out the passage where Alvin and Heidi Toffler talked about the bogeyman of mechanization in the 1950s and 1960s. They both used to work on an aircraft assembly line, one of the first kinds of jobs that got mechanized. The Tofflers reminded us that no one should shed a tear over these jobs, because these are the kinds of jobs that nobody actively wants in the first place.
It's one thing to tighten bolts for a living because the the nation is at war. It's a completely different thing to expect a long career for the rest of your life as a "bolt tightener" because that was the skill you learned during WWII.
Right now, the IT sector is in the process of weeding out the "bolt tighteners". The challenge for us now, as Phil points out, is to find and solve the problems that need to be solved.