Comments on: Real incomes are down here … http://www.mightybargainhunter.com/2006/03/07/real-incomes-are-down-here/ Personal finance, commentary, and spending less the easy way Fri, 19 Mar 2010 14:24:44 -0400 http://wordpress.org/?v=2.8.6 hourly 1 By: Suresh http://www.mightybargainhunter.com/2006/03/07/real-incomes-are-down-here/comment-page-1/#comment-923 Suresh Wed, 08 Mar 2006 22:10:28 +0000 http://www.mightybargainhunter.com/2006/03/07/real-incomes-are-down-here/#comment-923 Morgan Stanley Chief Economist Stephen Roach has written about this in relation to globalization. With globalization, tradeable products and services are sent to offshore manufacturing or service platforms. The net effect is that real wages in developed countries stagnate or fall, while real wages in developing countries increase. Absent changes in Westerners' personal finance, average Western standards of living will fall, while average developing countries' standards of living will rise. Consider an example. GM closes an auto plant in the U.S. and builds an auto plant in Mexico. Over the past several decades, UAW workers made respectable salaries and with tenure, handily beat the average per capita income in the U.S. If the former workers at that closed plant don't get comparable paying jobs, all else being equal, they will necessarily bring down the average per capita income. The reverse works in Mexico. Morgan Stanley Chief Economist Stephen Roach has written about this in relation to globalization. With globalization, tradeable products and services are sent to offshore manufacturing or service platforms. The net effect is that real wages in developed countries stagnate or fall, while real wages in developing countries increase. Absent changes in Westerners’ personal finance, average Western standards of living will fall, while average developing countries’ standards of living will rise.

Consider an example. GM closes an auto plant in the U.S. and builds an auto plant in Mexico. Over the past several decades, UAW workers made respectable salaries and with tenure, handily beat the average per capita income in the U.S. If the former workers at that closed plant don’t get comparable paying jobs, all else being equal, they will necessarily bring down the average per capita income. The reverse works in Mexico.

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