The first blow was the offshoring of manufacturing, turning once productive and prosperous regions into Rust Belt, eliminating half the factory jobs, forcing $18 per hour auto workers to seek $8 per hour service jobs. The other calamity was the growing foreign trade imbalance, which meant we started to produce less and consume more, or as Lee Iacocca put it, “We became a colony.” A colony exports raw material, in our case, steel, and imports finished goods, in our case, cars. The next wave of assault, thanks to new technology like computers and the Internet, both cheap and quickly implemented anywhere in the world, was the outsourcing of non-manufacturing jobs. All of a sudden, nobody was safe. One could be a highly trained radiologist in the US and still lose work to an Indian radiologist who is grabbing X-rays taken last night in America off the Internet, making a diagnosis and e-mailing reports back to America.

Follow this link. (Sorry, I don’t know how to make it clickable.) http://www.census.gov/hhes/www/income/histinc/h08.html During the same disastrous timeline of 20 years, the Median Household Income (not average but median) grew 14% in 2006 dollars after adjusting for the CPI. This is irrefutable data. Averages can mask huge income disparities but medians portray a fairer income distribution. The year-to-year figures are standardized to 2006 dollars and adjusted for CPI, which mean that all the variables are squeezed out to present an apple-to-apple comparison between 1984 and 2006.

Of course, the “widening income gap” theorists would like to jump in at this point. To allay their fears, let’s look at what the economists call Gini coefficients, a measure of income disparity within a country. The Gini coefficient for the US was 0.38 in 1984 and 0.42 in 2000. The higher the score, the wider the gap. A coefficient of 1.00 would indicate that one person has all the wealth, whereas 0.00 would mean that all the people have the same wealth. The GO rose a slight 0.04, from 0.38 to 0.42, over the same timeline that the vaunted US middle class supposedly shrunk drastically. Follow this link http://en.wikipedia.org/wiki/Gini_coefficient

There will be many quibbles with the data, and I am trying to anticipate a few. 1. Household incomes rose because more spouses started to work. Yes, but there are more one-income households today, thanks to rising divorce rates. One cancels out the other. You can mine the US Census figures if you would like. 2. Today’s technology driven outsourcing is different from the manufacturing driven outsourcing of the past. How precisely? And technological advantages cut both ways. 3. The income and income distribution data cannot possibly reveal the many pockets of misery inflicted by outsourcing. Of course! Who can be insensitive to the plight of a 50-year old IT guy who brought home $100,000 a year, gave his family a decent life, still has two kids in college and a huge mortgage but just lost his job to an Indian software company. This 50-year old doesn’t have enough time left to learn new languages, and even if he did, he can’t afford to work at the Indian programmer’s salary. At age 55, I can sympathize with the worker that is beyond re-directing and rehabilitating for reasons of age if not educational level and other socioeconomic handicaps.

But facts are facts. Personally, I want to preserve every US job. Intellectually, I need to take a stand on outsourcing.

Not that I think it is a zero sum game but it certainly is not a everybody can win scenario. The resources on earth are limited and we haven’t figured out how to exploit resources in the outer space yet.

I keep getting reminded of the scenario depicted in V for Vendetta about the US! I wonder what’s to happen.

M Nam – bloody oath. The pyramid is the most common social structure. Good call on percentages. I dont suppose pre- WWI life was easy.

Branch Dravidian – middle class life as exists in the western world will probably vanish. I wonder how this will play out in Scandinavia. Will there be a revolution ? Sadly I suspect that I will see it in my lifetime

Puli – you are right. Ireland has been at the forefront of the offshoring boom for several years. Whinging begins only when the foreigner gets more.

I suppose being poor in the Western world sucks more than being poor in the Third World.

Mark Twain also said this:

“…But it was impossible to save the Great Republic. She was rotten to the heart. Lust of conquest had long ago done its work; trampling upon the helpless abroad had taught her, by a natural process, to endure with apathy the like at home; multitudes who had applauded the crushing of other people’s liberties, lived to suffer for their mistake in their own persons. The government was irrevocably in the hands of the prodigiously rich and their hangers-on; the suffrage was become a mere machine, which they used as they chose. There was no principle but commercialism, no patriotism but of the pocket.”

Time will tell which of those two quotes will come to pass.

yeah…no one talks about ireland when they talk about outsourcing. a white dude competing is expected. they are white. therefore, its good that they are getting on their feet. the brown ude, well…he “stole” “our” jobs.

I will paraphrase a line of Mark Twain’s, “The reports of the US economy’s demise are wildly exaggerated.”

is right on the money.

With falling US $ and the benign neglect of it from the fed, it appears that second chapter in outsourcing story is about to start. China will not be able to keep its currency at artificially low levels for long. At which point both India and China will discover (India will do that earlier) their domestic market and dynamics of outsourcing will change.

Correct. But first it will go to its pre-WW I(one state), which was much lower. Then it will slowly go back up and stabilise to ~30% of the population. The size of the American (and Western European) middle class of the last forty years is an aberration from the historic norm and will correct itself to much lower levels. This will be accompanied by rising standards in Asia(incl. India) and Eastern Europe, then in Africa. When this is all over, every country in the world will have the same class composition: ~10% rich, ~30% middle and ~60% poor – just as it has been throughout history. The big difference will be in the cause of the class divide: Since the dawn of civilisation, ownership of land, water and muscle power determined the person’s class, in the future it will be ownership of superior intellect, organisation skills and muscle power that determines the person’s class.

Muscle power ain’t going away…

M. Nam

I’m guessing that the American middle class will contract back to its pre-WW II state… composed mainly of professionals, managers and small businessmen. Most of the blue collar workers currently enjoying middle class lifestyles will see their standard of living decrease. There will be a large working class but probably not as much extreme poverty as currently exists in India. A better comparison might be late 19th/early 20th century Britain. It may take more than a generation to reach that end state, however…