This is my blogchalk:
United States, California, San Jose, English, Hindi, Male, 31-35, Watching movies, Reading, Writing.

  Web ashishniti.blogspot.com   
New Blog

Ashish's Niti

Niti in Sanskrit means policy/strategy/vision. This blog hosts my political views, along with news and commentary. This blog has moved here.

Tuesday, July 27, 2004

More immigration is the right anti-dote to Outsourcing :: AO

During the dot com bubble, there was tremendous demand for IT professionals. Because of constraints on the supply of IT professionals (immigration controls), their salaries shot through the roof. This was also a major reason why DotComs failed.

Right now jobs are flowing out to India, China, and elsewhere in search of cheaper labor. Remember, US is the largest importer of foriegn capital and this capital can easily flow instead to India and China. Thus the question for US is not just prevention of erosion of existing jobs, but attracting incremental capital. That can only be done if labor market is flexible. Because of restrictive quotas on IT immigrants and requirement to maintain existing wages for immigrants, US labor market is extremely inflexible. Opening of Indian and Chinese economy for foriegn investment means that this hidden flaw in US labor market is showing its consequences.

Opening of US immigration will reduce the wages in US, but at the same time make the products and services cheaper. What's the point of earning high nominal wages if you have to shell out huge amounts for services of doctors, lawyers, accountants etc. ? Combination of low nominal wages and cheaper services will be much beneficial than high nominal wages and high service costs for everybody.
See also

See post on how technology is causing reduction in jobs

Creative Commons License
This work is licensed under a Creative Commons License.