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• Mobile capital, technological change, and worker c (Score:2, Interesting)

  by mary.poppins (3530)

  The effect of mobile capital is twofold:
  
      1. Move production to cheaper places
      2. Reduce the price of commodities
  
  This is entirely predictable, and exactly what we have seen happen. The
  standard justification given for free trade in intro Econ classes (production
  moves to where it's most efficient, and everyone wins -- "comparative
  advantage") works only under the assumption that capital does not move between
  the areas under consideration. Which might have been a reasonable assum
  • Re:Mobile capital, technological change, and worke (Score:2)

    by ziggy (25) on 2003.12.23 19:53 (#26814) Journal

    As for whether this process hurts or helps US workers, I think it's a toss-up (sure, you lost your manufacturing job, but look how cheap all the stuff is at Wal-Mart!). Sometimes, there are very clearly disastrous social effects of radical capital shifts: think US Rust Belt (Gary, Indiana), or the equivalent area in northern England.

    Yes, as a large-scale trend, loss of US jobs offshore is a very devistating issue that no one is really trying to fix in the US. I find it utterly depressing that Wal-Mart is now the largest employer in the US.

    Yet I see the drivers for outsourcing IT work to other companies. In some small companies I've worked for, there just isn't enough money to hire capable IT staff. IT is a service, a business expense, and doesn't contribute to the bottom line. Furthermore, if a company like this can afford to hire someone junior, they certainly cannot afford to keep their skills up to date. And let's not talk about what happens when something really tricky comes down the pike, like a nasty Outlook worm.

    So, on the one hand, consolidating jobs and outsourcing IT services to a contractor is a net benefit: access to highly skilled, capable practitioners, pay for what you need (even if it's not a FTE). On the other hand, there's a net loss of (entry-level) jobs, but a net benefit to business and skilled workers who want a fair wage and a challenging job.

    Then there's the trend to send the outsourced jobs offshore to East Elbonia. As I stated above (and below), I don't see this trend holding up to sustained scrutiny. On the whole, offshoring of IT jobs isn't like the maquiladoras, because the kinds of low-paying jobs that are most easily sent offshore are the ones that are made obsolete by new technology. And creating new technology is what we do best here in the high-wage world.

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