Spreading globalization and information technology are hollowing out the U.S. middle class. The growth of low-wage work abroad and high-speed telecommunications make it possible to handle more jobs off-shore.
The gains from free trade may increasingly be going to a small group at the top. For the vast majority of Americans income growth has all but disappeared in recent years. Inflation adjusted earnings have fallen in every educational category other than the 4% who hold doctorates or professional degrees. In university towns, like here in Ann Arbor, MI where bookseller Borders began, you will find many of those with doctorates working in retail stores.
Such numbers suggest the share of Americans who aren't included in the gains from trade may be very big. "That's a very important change from earlier generations, and it should give pause to people who say they know what's going on," says Dartmouth's Matthew J. Slaughter, an international economist who served on President George W. Bush's Council of Economic Advisers.
Eventually, up to 40 million service jobs in the U.S. could face competition from workers in India and other low-wage nations. That's more than a quarter of the 140 million employed in the U.S. today. Many of the newly vulnerable will be in skilled fields, such as accounting or research--jobs U.S. companies will be able to move offshore in ever greater numbers.
Since many U.S. workers aren't sharing in the gains from open markets, a political blowback is possible to create some form of income redistribution that spreads the gains from free trade to more workers.
Source: BusinessWeek, February 11, 2008