US Race to the bottom end game scenarios
Let's try to envision possible scenarios for United States workers if this race to the bottom (with its attendant offshoring) continues.Scenario 1: wages drop or stay the same, prices continue to rise
This is the most likely thing to happen. If it does, more and more people will be forced out of industries where jobs have been offshored. Manufacturing has been going for quite a while, IT has been getting murdered over the last few years, and now even R&D and some management has started to go. There are now even offshored medical jobs (like Radiologists). There will continue to be many labor market dislocations, with workers forced to change careers into service industries (food, hospitality, education, and medical) with others simply forced into unemployment or transient McJobs. Even workers willing to compete on salary with non-domestic ones would be unable to due to living costs. You can only cut so much.
Bottom line: US workers will be forced to accept lower paying, lower-benefit, less secure (and likely less challenging and interesting) jobs along with a much lower standard of living. Basically a continuation of what we have now.
Scenario 2: wages stay the same, prices crash (partial deflation)
Very unlikely, since wages tend to crash along with prices. Additionally, there are some costs which are not likely to be coming back down to historical levels (food and energy), but this would be interesting to see.
Bottom line: don't count on it.
Scenario 3: wages drop or stay the same, prices continue to rise, anti-Globalization of Capital (AKA "Free" trade) legislation passed
Highly unlikely politically. If it did occur, there would likely be a race to the exits for domestically incorporated firms who have become dependent on cheap labor, with only small and medium companies (who are unable to offshore) with much smaller workforces. This would likely lead to even less jobs domestically.
Bottom line: politically volatile, potentially destructive. Not going to happen.
Scenario 4: wages and prices crash (fully deflationary)
Possible after a sustained inflationary run-up. Assuming US labor costs were able to come into line with non-US ones, we could be competitive internationally again. Of course, for some industries, it'd require some serious (re-)investment since many of the things used to produce have been shuttered (factories don't turn themselves back on - especially ones that have been knocked down for strip malls). It would be easier in areas like R&D and IT, however. Unfortunately, this scenario would also require a serious readjustment of our standard of living, with all of its attendant effects - gutted public services, leaner diets, and social unrest.
Bottom line: many Market Fundamentalists (like Greenspan) and fake Free Trader supporters are fans of this scenario. Decent possibility of occurring. Probably better than Scenario 1.
Scenario 5: wages drop or stay the same, prices continue to rise, relocation/retraining assistance provided
Somewhat likely, but probably useless. Akin to rearranging deckchairs on famous sinking ship. With many high paying jobs already gone, there wouldn't be a lot to "retrain" to.
Bottom line: Not particularly helpful, would wind up in Scenario 1.
Scenario 6: wages and prices rise
Not useful. Would accelerate offshoring trend.
Bottom line: would wind up looking like Scenario 1 after a short amount of time. Wage gains would be eaten by price gains, making it a wash.
The trend towards globalizing capital is likely here to stay, and will cause much misery and strife in the short to medium term. In the long run, as wages even out, immigration/emigration policies come to about parity, and standards of living become similar, maybe we could have real "Globalization of Labor". We'd also need cheaper travel costs to be able to do this sort of thing regularly (to be able to move from national market to national market) along with English being more than just the Lingua Franca of business - it'd need to be the language of domestic affairs as well. Additionally, if all this really happened, we'd likely move back towards a more domestic model anyway, since for many, or even most jobs, the gains of offshoring (aside from very specialized talent that's in short supply domestically) would be lost. In any case, as the saying goes, "In the long run, we're all dead."
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