Quote from aegis:
Umm, profits?
Cheap labor = greater profit margin
The economists will spout some bullshit about comparative advantage of course. Thing is, those "cost savings" don't always result in lower prices for the consumer.
Same with union/non-union labor in the construction industry. Non-union contractors don't always pay their workers nearly as much as union contractors. However, they still have to bill the same hourly rate as the union contractor does. Well, that extra profit goes straight into the contractor's pocket.
Comparative advantage works great in theory, but it doesn't work in practice.
If you don't think Ricardian economics works well in practice then you don't understand it. Comparative advantage doesn't claim that the price will be lower, only that the COST will be lower. Someone who doesn't understand economics easily confuses the two terms.
Price is dictated by supply and demand, and is more specifically controlled by the price elasticity for a given product.
Cost of production really doesn't have anything to do with the price of a product, except for to say that manufacturers will not produce a product if it costs more than the price they can sell it for.
Comparative advantage revolves around the idea that the job will go to whomever/wherever the opportunity cost of production is the smallest. The goal of the manufacturer is to increase profit margins, not reduce the market price of his product.
The market price is only reduced when another manufacturer realizes the profit potential and copies the first. Thus, supply is increased, which results in lower prices.
In the end, long-term our economy is not hurt by the outsourcing of jobs, but actually helped by it. We consistently outsource mostly the low paying jobs and keep the higher paying jobs here. We maintain healthy levels of unemployment, and actually grow increasingly rich relative to the countries that we are outsourcing the jobs to.
If unemployment were to get out of control here, then unemployed workers would suppress wages, and more of the jobs would come back from oversees. Unfortunately, our g-ment then disrupts this natural mechanism by implementing controls which pretty much ensure that it will always be more expensive to employ low income workers domestically.
