The hard truth for Americans (I am talking about Americans because most of these are large cap US companies) is that other countries are cheaper for the following reasons:
1) Companies can find comparably trained and educated workers in non-US countries at cheaper rates because the U.S. education system doesn’t discriminate against less performant students. The education systems in many other countries are competitive at various stages and serve as strict filters against laggards, and there’s less consideration for meeting basic human needs in some countries. But in others there are different options where many students naturally find themselves (like less paying or blue collar work), and if that were to happen in the U.S. then inequality advocates will have a lot to say, and they wouldn’t be wrong.
2) There are a lot of realpolitiks at play when you have a multicultural society as people will often have dual allegiances. A CEO or hiring manager from country X or Y will want to favor their country of origin, naturally. It becomes easier to justify some decisions when the bottom line is also helped by said decisions by hiring cheaper labor.
3) The most expensive thing on the U.S. budget books for employers, employees and the government is social security and Medicare. Some countries simply deny their citizens and workers social security and access to welfare programs, which helps keep the cost of employing them down.
4) Even if a global corporate tax rate is set, it will still make labor in countries that don’t ask for social program contributions much cheaper.
5) The rule of law situation in some of these countries is less than ideal, and so living there can be a hit or miss, which is why H1-Bs are a popular choice for both employers and non-U.S. employees.
6) But still it seems that regional security and stability in some regions has led to permissive environments for unrestricted work. This situation isn’t going to change for nuclear countries, unless they’re like Russia (screwed by economic sanctions and expansionist desires).
So in the short-term, unless there’s some agreement to be made between countries for balancing their labor market loads, then economic sanctions seem like a terrible last resort.
Addendum, I think the hard truth for large cap companies is that they never should have been allowed to get that big, and in many cases their growth was aided by direct investment by the U.S. government. There’s an interesting lesson here for policy makers about balancing power and investments. Maybe the U.S. should divert future government spending to only its research labs.
The thing is: it’s nothing new. In early 2000s there was a wave of outsourcing that caused panic in the US. Back then, the difference in salaries was even higher than nowadays. In some cases it worked out well for the employers, but in many cases it did not for various reasons.
No, the top "cost" problems with hiring Americans are America's out-of-control costs for education, health care, and housing. Those industries (or existing homeowners, for housing) are growing obscenely fat and rich. And really don't care if they destroy America's economic future as a side-effect.
> Those industries (or existing homeowners, for housing) are growing obscenely fat and rich.
The problem is, sure, your house that your parents built for 100k in the 80 is worth 1 million dollars on paper, just because of urbanization. But that "wealth" is pretty much useless, at least as long as you reside there it can't be realized. So you either have to sell off the existing home and find a new place to live which only makes sense if you move to a drastically lower CoL area, or if you're of old age you may get away with living off the equity by getting a HELOC backed by the home - the downside of that is of course that your children won't have much of an inheritance left.
That's also why taxing real estate on land value is a very, very bad idea - land values rise exponentially or at the very least far faster than wages, which forces rent hikes for renters and forces off old established businesses and ordinary people.
> That's also why taxing real estate on land value is a very, very bad idea - land values rise exponentially or at the very least far faster than wages
If you tax real estate, owners of real estate will make sure it's not overvalued by encouraging more real estate to be built.
Land values have risen faster than wages due to growing wealth inequality - whereas as land value tax does not pass, empirically speaking, through to renters - because there is a fixed amount of land. In other words higher land value taxes could have helped mitigate or even cancel the the disconnect between wage and housing costs that we have become afflicted by in this upward transfer of wealth.
But consider the PoV of an average-ish (say) 65-year-old homeowner. He knows he could live to 95 or so, that medical costs go up far faster than the official US gov't inflation rates, and that being in a nursing home (which he might need for 5+ years) is already ungodly expensive. And that the thundering herd of older-than-him boomers may have trampled Social Security and Medicare to death before he starts really needing those.
He ain't got $10M's in other assets, to say "whatever; I can afford it".
The "value" of that house, and the idea that it could somehow keep appreciating far faster than inflation - those things are really, really important to that homeowner.
> 3) The most expensive thing on the U.S. budget books for employers, employees and the government is social security and Medicare. Some countries simply deny their citizens and workers social security and access to welfare programs, which helps keep the cost of employing them down.
Holy cope batman!
A whole bunch of countries...just provide those things as government services too! You can employ whoever you want and not become a health insurer and the taxes that employee pays will fund a very large risk pool, what a concept!
The level of confidence my fellow Americans have in their understanding of the rest of the world without knowing anything about the rest of the world is always hilarious to watch.
Even India has a vast network of completely free government provided healthcare. Of course, the quality leaves a lot to be desired but bit beats walking into the ER to receive basic care and bankruptcies due to medical debt, which must be a uniquely American phenomenon.
Countries where most white collar jobs are being offshored to expect on average 10-12% social security contribution from employers. In some of these countries, less than 50% qualify to be on social security. Collectively, the U.S. employer and employee pay 12% towards it, but higher cost of living requires setting salaries higher to compensate, and all US workers except illegal immigrants qualify for social security.
I think it depends on what you mean by "cheap foreign engineers." I am born and raised Canadian. I make a decent chunk less than my American counterparts, even when working for the same company. Not because they are necessarily better suited for the job, but literally because of the country I live in. The same is true for engineers all over the world.
So yes, companies absolutely can get cheap(er) labour and have the same, or at least similar, quality.
The foreigner from your point of you is a local to the market that companies like Amazon or Meta are serving. It's easier to understand what appeals to that market from the ground rather than the US west coast.
Believe it or not there is talent even in countries where salaries are lower. For 3000 - 4000 USD month you can get good english speaking senior engineers in Vietnam used to work in international environments. Not FAANG tier but strong fit for most $CRUD companies. This is cheaper than US by far, although the gap with Europe is unironically closing.
As someone that routinely works in offshoring projects, most business don't care, even if there are escalations as long as total cost remains under doing everything in the country, upper management is happy.
An example is the amount of crap software that exists out there, that people would rather use with a race to bottom prices, instead of paying for quality.
1) Companies can find comparably trained and educated workers in non-US countries at cheaper rates because the U.S. education system doesn’t discriminate against less performant students. The education systems in many other countries are competitive at various stages and serve as strict filters against laggards, and there’s less consideration for meeting basic human needs in some countries. But in others there are different options where many students naturally find themselves (like less paying or blue collar work), and if that were to happen in the U.S. then inequality advocates will have a lot to say, and they wouldn’t be wrong.
2) There are a lot of realpolitiks at play when you have a multicultural society as people will often have dual allegiances. A CEO or hiring manager from country X or Y will want to favor their country of origin, naturally. It becomes easier to justify some decisions when the bottom line is also helped by said decisions by hiring cheaper labor.
3) The most expensive thing on the U.S. budget books for employers, employees and the government is social security and Medicare. Some countries simply deny their citizens and workers social security and access to welfare programs, which helps keep the cost of employing them down.
4) Even if a global corporate tax rate is set, it will still make labor in countries that don’t ask for social program contributions much cheaper.
5) The rule of law situation in some of these countries is less than ideal, and so living there can be a hit or miss, which is why H1-Bs are a popular choice for both employers and non-U.S. employees.
6) But still it seems that regional security and stability in some regions has led to permissive environments for unrestricted work. This situation isn’t going to change for nuclear countries, unless they’re like Russia (screwed by economic sanctions and expansionist desires).
So in the short-term, unless there’s some agreement to be made between countries for balancing their labor market loads, then economic sanctions seem like a terrible last resort.
Addendum, I think the hard truth for large cap companies is that they never should have been allowed to get that big, and in many cases their growth was aided by direct investment by the U.S. government. There’s an interesting lesson here for policy makers about balancing power and investments. Maybe the U.S. should divert future government spending to only its research labs.