Before we were a single connected world, the United States was a protected labor market.  It was difficult to do work outside of the United States to serve companies inside the United States. 

With the advent of a connected world, those barriers to entry to the U.S. labor market are down.  And this has big implications for an average American family because we’ve had a protected labor market that means that our wage has actually been artificially high on the world market. 

So the classic case of this is not the garment worker in Vietnam today, the classic case is the Radiologist in India that if in the middle of the night you go to the emergency room and have an x-ray taken, the doctor who reads that x-ray is very likely to be a well-trained physician in India, for whom it’s daytime, who reads the digital file and sends back an answer.  

The result of that though is pressure on the earnings of an American Radiologist.  So this is not just a cheap labor issue, it is an equalization of the labor markets around the world.  Now, it doesn’t happen overnight, but what it does mean is that relative to the standard of living to the rest of the world, the standard of living in the United States will come down.  Now, that doesn’t mean down in absolute terms.  You’re not doing worse than you were yesterday.  But when you go to Brazil, you’re going to find things more expensive than you expected them to be.  

This happened before in the 1980’s when the Japanese economy was growing so rapidly and the U.S. was stagnating.  People would go to Tokyo and be unable to understand why hamburger was costing them $15 or a Coke, you know, $9.00.  It will be that kind of a situation where the U.S. cannot take for granted that its wage puts them on top on a world scale.  

In Their Own Words is recorded in Big Think's studio.

Image courtesy of Shutterstock