After his December 13 speech to the Economic Policy Institute, Larry Summers said this in response to a question:
If our college graduates or our high school graduates find themselves embedded in an individualistic competition with workers from around the world, or if they develop skills for which the demand is going to fall due to possible replacement by technology, their wages are not going to rise. A necessary strategy for increasing wages is that we develop areas of unique strength that are less subject to international competition. That means the vast range of activities described in my speech where the market is inherently local. That also means maintaining the capacity for innovation so that our production is producing things that are not in what business strategists call commoditized businesses where that competition is going to be much more brutal.
Mark Thoma says this about the Summers answer:
No matter how hard we try, some people are still going to be in competition with workers around the world and their wages are going to stagnate relative to others. This will lead to an increasingly divided society in terms of the haves and the have nots, and how we choose to deal with this reality -- the steps we take to close the gap, or not -- is one of the more important questions we face.
Thoma's reference to "some people" seriously understates the size of the problem. Inherently local activities include plumbing and other construction trades, food service, nursing and most other health care services, guard labor, police, fire, and most other security services, most hospitality workers, hair stylists, installation and maintenance workers, etc. Those workers are not directly subject to wage competition from workers in other countries, but they are subject to wage competition from (mostly undocumented) immigrants from those other countries. As a result, their wages are under pressure even though the activities are "inherently local."
On the other hand, we're observing that many higher paid jobs, like software engineering, lawyering, accounting, university teaching, research and development, etc. are not "inherently local" and are being offshored at an accelerating pace.
Thus, a huge and growing percentage of US workers are in direct wage competition with citizens of developing nations, and that depresses the general wage levels also for those not directly affected, including federal, state, and local government employees. The way to avoid this wage competition, Summers says, is to put more emphasis on education and innovation—a "strategy" that is inherently ineffective and has been manifestly failing for decades.
In a related story, President Obama spent 4+ hours today building relationships with the CEOs of 20 very large companies. Perhaps 4 of them, Comcast, Pritzker Realty, Duke Energy, and NextEra Energy, could be considered to be in "inherently local" businesses, but the other 16 are about as multinational as they come. As I read the signs, there is no political will to change course--America's bipartisan support of unlimited globalization will continue and so will the decline of real US wages and the tax base.