Between 2003 and 2010, for example, Indian labor-outsourcing companies saw wages rise more than 50 percent. Over a longer span, real wages in southern China (which has been open to trade far longer than India) are now six times higher than they were just twenty years ago. These higher wages obviously reduce the competitiveness of the firms that must pay them. Moreover, it is not just wages that adjust: The relative values of national currencies move, too.
Between 2003 and 2007, the value of the dollar fell more than 25 percent, making foreign goods (and workers) more expensive here and making U.S. goods and workers more attractive in foreign markets. Of course, adjustments are never instantaneous. Moreover, they are occurring because some American firms are moving output and employment abroad; hence, at least some U.S. workers are having to move to lowerpaying jobs, often with a spell of unemployment along the way. How big is the impact in the short run, before all of the price adjustments take place?
According to the Bureau of Labor Statistics, in a typical recent year, the number of jobs lost to outsourcing is measured in the thousands—out of a workforce of over 155 million. So if you are currently a U.S. software developer, you don’t have to worry about packing your bags for Mumbai, at least not soon.
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