John Silvia is chief economist at Wachovia Bank N.A. in Charlotte, North Carolina. Previously, he worked for the U.S. Senate Joint Economic Committee, U.S. Senate Banking, Housing and Urban Affairs Committee, Kemper Funds, Scudder Kemper Investments, Inc, and Indiana University. He has a Ph.D. degree from Northeastern University and a M.A. degree from Brown University. He serves on various professional and community panels and boards. He has been president of the NABE Chicago and Charlotte chapters and chair of the NABE Financial Roundtable. He currently serves on the NABE board of directors.
Conventional thinking about labor markets has been slow to adjust to the reality of labor in a context of a global rather than a closed, national economy. Liberalization of international trade and capital flows has made substitution of foreign for domestic labor increasingly feasible. This has put downward pressure on reservation wages of unemployed workers. Also, the relatively easy substitution of foreign and domestic manufactured products relative to services has led to a dual economy in which manufacturing employment has been severely impacted by foreign competition while service employment has not. This has been amplified by the U.S.’ comparative advantage in high education and skills, which tends to be more characteristic of services than of manufacturing. This implies that low-skilled workers will be increasingly left behind unless they upgrade their skills in an increasingly competitive global economy.
By John E. Silvia