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Subj: Thought experiment...
Posted: Sun Oct 19, 2008 at 08:13:44 am EDT (Viewed 551 times)
Reply Subj: Re: My green eye's view of economics for real people
Posted: Sat Oct 18, 2008 at 02:09:09 pm EDT (Viewed 582 times)

> Don't think about it as wage, think about it as value. If the American worker was better, companies would be willing to pay them more. The key is that foreign workers can "do the same exact job" for less. Therefore, they have the better value.
> The ways to increase value are either to lower the cost (wage), or increase the productivity. That could be done by having a better educated worker, better facilities and processes, better leadership, etc.

This comment interested me, so I engaged in a thought experiment.

First, I tried imagining if, for any job type which is competitive on the global labor market, American workers could, without assistance from business owners or the government, somehow emerge so superior to their foreign counterparts that their unavoidable higher wages would be offset. Try as I might, I can't make this work in my head, because I know of no labor category for which the American worker is born superior to others or somehow nurtured to be superior to others. Left to random selection, the American worker will, on average, be no better than the foreign worker, and therefore will always be less desirable than the worker in the third world, due to the lower consumer prices that permit the third world worker to subsist on far less income.

So then I tried imagining what would happen if business owners or the government took a direct hand in this. I can see two things they could do. First, they could test young children for superior aptitude in a specific labor category, and steer those children deliberately in the direction indicated. Second, advanced training techniques could be applied to these naturally more apt children, to maximize their potential for the specific labor category. Short term, this would work. But eventually some third world countries, surely China and probably India, would copy both the test-and-steer process and the advanced training techniques, and we'd be back to square one, because China and India will surely have just as many naturally apt children and plenty of teachers to apply the advanced training to those children. Long term, competition would devolve once again into selection of the worker who can absorb the lowest wage, and that will always be the third world worker/consumer composite person who faces lower prices in the consumer market.

My thought experiment leads me to conclude that, long term, the American worker's best strategy is to abandon the global labor markets to the third world, and focus exclusively on labor markets that are local, which means, primarily, focusing on service jobs.

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