Foreign Workers Do the Same Work for Less :
Since the U.S. labor force is becoming less competitive, our workers must compete on price. (See
U.S. Is Losing its Competitive Edge).
China is able to produce things more cheaply by paying lower wages. That's because China has a lower standard of living, meaning things cost less, so companies can pay less. (See Purchasing Power Parity
As a result, U.S. companies can only offer low wages to U.S. employees if they are to compete against Chinese companies. If U.S. companies can't find enough low wage, skilled workers in the U.S., they have to source these jobs overseas or go out of business.
Wage Income Is Not Increasing:
As a result, the
U.S. Labor Department reported that February 2008 average hourly earnings increased 3.7% in the past year. Unfortunately, prices increased even more during that time, so that real earnings in terms of purchasing power actually
decreased .8%. Average earnings were $596, or $30,992 per year. (Note: This is the total earnings of all private sector, non-farm, non-supervisory employees, full and part-time, divided by total number of hours worked.) (Source: Bureau of Labor Statistics,
Real Earnings Report)
Productivity is Up:
While inflation-adjusted wages were down .8% in the last year, productivity was up 1.8%. This means that, even though workers were producing more, they felt like they were getting paid less. However, a large part of the increased productivity is because of the Internet and other technology solutions which allow workers to produce more with the same amount of effort. Therefore, even though they are be producing more, workers may not be working harder.In summary, the U.S. labor force must increase production faster than their incomes rise to stay competitive with foreign workers. This will lead to a lower standard of living in the U.S. in the long term as wages equalize.
