Recently computer programmers in developing countries such a

Recently, computer programmers in developing countries such as India have began doing work formerly done in the USA. This shift has led to the substantial pay cuts for some programmers in the united states. Answer the following questions: How is this possible, when the wages of skilled labor are rising in the USA as a whole? What argument would trade economists make against seeing these wage cuts as a reason of the block outsourcing of computer programming?

Solution

a.

Labors are cheap in India compare to the US. Since the programming works are outsourced to India, these are done at cheaper rates. US-companies need not to pay high now for getting thing done, causing pay cuts of US-programmers.

b.

If the country block such outsourcing work because of pay-cuts, there might be serious objection of trade economist. They could argue in a way that the cost of programming work would increase because of cheaper-rate facility is gone. This is not economical, since the cost of production would increase and the consumers have to bear it.