Offshoring and Skilled Labor

I was reading The Conservative Nanny State by Dean Baker, and it brought me to some interesting thoughts about off-shoring and its disproportionate affects on the skilled labor force. He claims that the corporations and those in power have manipulated trade agreements and certification methods such as the bar exam to create a surplus of low-skilled labor, while tightly regulating the supply of skilled labor to keep wages high. Baker insists that trade agreements like NAFTA and CAFTA place low-skill laborers in the US in direct competition with foreign low-skill workers, depressing their wages, inflating corporate profits. Conversely, regulations are put in place to limit an influx of skilled workers from other country. Baker gives one example: "Congress tightened the licensing rules for foreign doctors entering the country because of concerns by the American Medical Association and other doctors' organizations that the inflow of foreign doctors was driving down their salaries. As a result, the number of foreign medical residents allowed to enter the country each year was cut in half".

I think they is more to this that Baker did not explicitly touch on. One reason for the ease in off-shoring certain operations is where the consumer base is. Take the car manufacturers - it is easy for them to more production overseas because their consumer base is not specific to, say, Detroit. They sell cars all over the United States, so for them it would make sense to produce where the labor is cheapest, since they don't lose a significant consumer base in the process. A doctor, on the other hand, is dependent on his local consumer base. He receives no benefit from moving to a country where labor is cheap or environmental standards are low. By moving, he would lose his consumer base and the new consumer base would not likely be able to afford him the same wages he was used to in the more developed country. So, although public decisions such as trade agreements may influence certain off-shoring practices, private profit maximizing cost-benefit analysis is also considered.

I am in no way condoning off-shoring practices or sub-livable wages which are forced upon those low skilled workers. I just wanted to offer a bit of my own analysis of what contributes to this globalization problem. It is indeed a problem that needs to be dealt with, as the income gap grows at exceeding rates. If only we could all be as optimistic as Thomas Friedman (but that would require a substantial amount of arrogance, with a helping of ignorance on the side).