Keynesian Economics, National Wage Rates and the Offshore Outsourcing Phenomenon

In the world of economics, every participant in the scene is regarded as a commodity - raw materials, ideas, business processes, and even labor and time. Like all buyer goods, the economic value of labor also rises and falls. However, in an attempt to preclude economic anarchy that will inevitably arise from mass retaliation, varied national governments, in consideration of Keynesian economic principles, have decided to apply protectionist policies that operate wage rates.

This is why wage cuts seldom happen. At worst, a country will not increase wage rates for long stretches of time. However, very seldom do they genuinely decrease the paycheck of their employees. However, the normal trend is that when a needful chunk of labor force greatly increases it productivity, the rest of labor force, even if they stayed stagnant, will also corollary suit. Hence, the bloating of national wage rates.

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Swelling wage rates also imply commodity inflation, as the relative value of goods and services are very dependent on the whole of labor used to generate and deliver it. In short, since everybody gets paid more, a buyer will also have to pay more for goods and services acquired from someone else someone since these goods and services were made ready with the more costly labor.

For example, let's use a globally popular hamburger brand as an index. In the Philippines, it costs roughly Us$ 2 in 2008, while one bought in the United States in the same year costs about Us.5 - a 75 percent difference. This is just one example of the term called "purchasing power parity", which illustrates the wide variations of the cost of living among countries. Let us now contextualize this hamburgernomics to outsourced labor rates.

A Us/hr. Web programmer in the Us would earn 0 a day. On the other hand, a Us/hr programmer in the Philippines will earn . However, living costs in the Us are much higher than that of the Philippines, so that the apparent "exploitation" doesn't genuinely exist. At per day, a programmer in the Philippines can pay utility bills, buy all basic needs, and pay rent for a decent 1-bedroom apartment.

Thus, fellowships can save more on labor costs, while their offshore employees wallow in sheer joy. Hence the outsourcing phenomenon.

Keynesian Economics, National Wage Rates and the Offshore Outsourcing Phenomenon

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