The View from the Middle Ground

The View from the Penthouse

For business leaders and members of the economic elite, globalization is good. Cheaper labor overseas enables them to build production facilities in locations where labor and healthcare costs are low, and then sell the finished goods in locations where wages are high.

Profits soar due to the greatly reduced wages for workers, and Wall Street rewards the big profit gains with higher stock prices. The CEOs of global companies also get credit for the profits. Their rewards are usually generous compensation packages, in which company stock and stock options figure prominently. Institutional investors and wealthy individuals also take home the big gains when stock prices increase.

The View from the Street

But globalization doesn't only affect CEOs and high-net-worth individuals. Competition for jobs stretches far beyond the immediate area in a global marketplace. From technology call centers in India, to automobile manufacturing plants in China, globalization means that workers must compete with job applicants from around the world.

Some of these changes arose because of the North American Free Trade Agreement (NAFTA). NAFTA sent the jobs of U.S. autoworkers to Mexico, a developing country, where wages are significantly lower than those in the U.S. A few years later, some of those same jobs were relocated to third-world countries in East Asia, where wages are even lower.

In both cases, the auto manufacturers expected U.S. consumers to continue buying those products at U.S. prices. While critics of globalization decry the loss of jobs that globalization can entail for developed countries, those who support globalization argue that the employment and technology that is brought to developing countries helps those populations toward industrialization and the possibility of increased standards of living.

The View from the Middle Ground

In the globalization battleground, outsourcing is a double-edged sword.

On the one hand, low wages in foreign countries enable retailers to sell clothing, cars and other goods at reduced rates in western nations where shopping has become an ingrained part of the culture. This allows companies to increase their profit margins.

At the same time, shoppers save money when they buy these goods, causing some supporters of globalization to argue that while sending jobs overseas tends to lower wages, it may also lower prices at the same time.

Lower-income workers also enjoy some of the benefits of stock price appreciation. Many workers have mutual funds holdings, particularly in their 401(k) plans. When companies outsource jobs and get rewarded with rising share prices, mutual funds with those shares also increase in value.