I'm always bemused by globalisation doomsday scenarios in which all of our jobs move to China (or India) in order to take advantage of low-wage workers. If we really do lose all of our high-productivity jobs, and no longer make anything worth having, why would the Indians and Chinese continue to ship us software programs and flat screen televisions?Ms. McArdle links to this NYTimes article on this very subject. Wages Up in China AS Young Workers Grow Scarce
The other reason this doesn't work, of course, is that as these economies expand, demand for workers pushes up their wages.
I spent a significant part of the last three years working in India training derivative traders and I saw the same phenomenon ocurring as described in the Times article. Wages rising fast but, more importantly a shortage of truly qualified workers. India has an enormous population of uneducated lower class workers. Those workers however need a great deal of education before they can step in and work in the call centers or programming shops. The cheap cheap labor era is over in India. The same appears to be ocurring in China. The impact will be higher inflation in the developed world than we have seen in the past decade.
I am in my fifties and I think my clothing expenses have been about the same for 20 years. granted I wear khakis and golf shirts all the time but still they don't seem any more costly now. Certainly electronic equipment such as computers have gotten far better and at less cost. All of this is due to low cost labor at the manufacturing countries and has partilly offset the soaring cost of services provided locally.
Absent a deflationary debt contraction ( no certainty ) wage pressures in China and India are going to diminish the deflationary contribution we have gotten used to from those countries products. i feel quite certain that my golf shirts will cost a lot more in ten years.