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Wednesday, September 07, 2005


Edward Hugh

"but I sense a structural change is underway in employer's use of offshore labour that may not have been captured by data ending in 2000."

You may well also be right. But I sense that a close examination of the German data post 2000 might make even more interesting reading in this sense.


I always find it interesting when studies in economics cite "common assumptions" regarding an issue without even quoting a specific source. Where are they getting these assumptions from? The media? Economists quoted in the media? Why do we care what they say?

I would think the only assumptions the people at the Fed need to worry about are those of the Chairman. His views on job losses to overseas markets are clear:


- Companies look to hire workers at the lowest possible wage, wherever in the world such workers might be.

- Low wages abroad have led to imported deflation into the US, keeping domestic inflation (and job creation) low.

I would think a paper by the Fed would look to confirm these assumptions rather than look to confirm anonymous claims, founded in idle prejudices.

I still go away from this paper with the idea that low wages abroad are what's stifling job creating in the U.S. and I'm wondering if policymakers have any idea how they're going to deal with this problem.

My guess is, they'll just go along rebuffing ignorant claims by the private sector without coming up with any real solutions. Blah..

Roehl Briones

"Importing deflation" may be a bad thing under weak domestic demand. But if aggregate demand is keeping the economy near full employment, realizing efficiencies in production will have their usual microeconomic benefits.

Complaints against offshoring jobs are in the same class as complaints against machines and automation. In both cases greater supplies realized increases the size of the economic pie; after some adjustment lags, labor gets re-allocated elsewhere in the economy.


... labor gets re-allocated elsewhere in the *global* economy...

Roehl Briones

No - in the domestic economy! (Unless the domestically unemployed workers happened to migrate abroad - not happening in the US, is it? Come to think, that would be a great answer to those complaining about the "great sucking sound"...)


... the job not the labor gets relocated. The people in the US losing their jobs will leave the labor force, leading to lower unemployment!!

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