more on Maybe there's no mystery after all

[Dave Farber <dave () farber net>]

Delivered-To: dfarber+ () ux13 sp cs cmu edu
Date: Tue, 06 Jan 2004 15:32:58 -0600
From: Dee Smith <deesmith () sigintelligence com>

Dave:

A fascinating corollary of all Steven Cherry's comment that in the very 
long run wage levels equalize is worthy of consideration.  Jobs are moved 
sequentially to cheaper labor pools where (and as) the labor in those 
places becomes skilled enough to handle the work, as Mexico has seen to its 
dismay in recent years.  Mexico, formerly a destination of choice for 
relatively skilled cheap labor, has seen jobs move to East Asia - China in 
particular - as its relative labor costs increased.

China and its neighbors represent probably the last large pool of cheap 
labor on the planet.  On the very long term that Mr. Cherry mentions, what 
happens to the base cost of production as the equalization process plays 
out and China's workers demand - and receive - higher pay in the decades 
ahead?   Will the cost of everything simply start to rise inexorably at 
some point? Is this sustainable, or in the long run will it be a wage 
bubble that bursts, worldwide?  How will (or might) population growth 
impact this?  Any IP economists have any insight on this?

Even if there is another pool of cheap labor in Africa or somewhere else, 
assuming processes continue in their present direction, at some point it 
will be absorbed too, so the question remains, it would seem.

-Dee

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