How long before .....
.....companies realize that offshoring is useless in the long term?
They find a country to do business in cheaply then build factories, offices, and hire locals that will work much cheaper then US or UK based workers.
While short term this may sound like a good idea, eventually the country/employess being used start realizing just how much they are being taken advantage of and start demanding standard pay and benefits. This eventually results in:
1. Employees will start requesting/making more money.
2. Local government will start requesting higher taxes for infrastructor and development.
3. Local government will start passing higher "minimum wage" laws so that residents can have a chance of paying the new taxes.
4. Local businesses will start charging more for local items since they will need to pay THIER employees more since they will have to stay within the limits of #2 and #3.
While the above seems like a good thing, as employees will be making more and the government will be making more, and this will eventually result in a higher development of the local country, the eventual route of 2 and 3 are:
1. Those business from the US and UK will start moving away to other lower priced countries to save money.
2. Since a large part of the jobs will be leaving the country, the employees will no longer have work, and will start looking for local jobs.
3. The countries employers, who have to stay within the "minimum wage" requirements and the taxes they have to pay, will start reducing staff to just the bare minimum.
4. Companies in the country will start outsourcing THEIR jobs to cheaper countries.
5. The country will end up having less and less jobs locally for their residents, however as the government has an infrustructer to maintain and have gotten to the point of liking the money they had, they will not reduce taxes.
6. The country will result in having a "recession" simiilar to the US and the UK are now experiencing.
7. Employers will not reduce prices. In a recession its common for prices to go up, so that a business will make the same amount or more then they were making before the recession.
The above cycle will continue to repeat as long as there is a country that employers can move jobs to that is cheaper then the previous country.
The one benefit?
Eventually it will be cheaper to have jobs in the US and the UK then in the rest of the world, however this will only be for a limited time as the above cycle will eventually repeat.
Possible fixes?
The US/UK government:
1. Slow down unecessary infrastructure changes.
2. Streamline governmental agencies to limit cost overruns/wastes.
3. Tax companies who outsource jobs to other countries, to the point that it is cheaper to higher local workers. (not going to happen)
Business in the US/UK:
1. Lower prices of goods. While this may sound weird, as long as prices are higher then costs, they can eventually make it up in volume.
2. Branch out into other areas if possible. A company that provides only 1 service is doomed to failure due to competition.
Unfortunantly, we will never see these type of changes.