Dan posted the following comment under the post Words of the Sage:

One thing that we cannot overlook, in the rush to a global economy, we forget about our standard of living. Many feel that a global economy will not work in the absence of a more balanced global standard of living.

Will a global economy reduce the standard of living we have become accustomed ? We will know the answer to this experiment in due time.

I thought the concern wide-spread enough that it deserved a a full-blown post in response.

First, we need to define what “our standard of living” is.  Our standard of living is far better than it was in the 1950′s.  The Economist article I cited in the aforementioned post says,

Americans have grown accustomed to extraordinary prosperity. Poor Americans today are more likely to have fridges, dishwashers and air-conditioning than average Americans were in 1971.

The average size of a house has more than doubled since the 1950′s.

There are other, less easily quantifiable aspects to our standard of living, such as the quality and price of food, but all of this misses the point, which is that “our” standard of living, although spoken of in the collective sense, is by no means collective.  “Our” standard of living is simply the aggregate or average of our individual situations.  (Of course, in the Socialist Utopia of the Democratic Party, we would all be in the identical economic situation, except, of course, for the Party Leaders.)

So the real question is, “How does an individual get in his particular situation?”  Following that, we must answer the question, “Will that be sustainable in the face of globalization?”

Without exception, we get where we are, financially, through work, whether we are receiving the fruits of our own work or of someone else.  Both employers and employees receive the fruits of the employees’ labor.  If the employers did not, they would not hire the employee, and if the employees did not, they would not work.  Those employees who produce more for their employers are paid more, lest they go to another employer.  (This is the fallacy of minimum wage laws and laws forcing employers to provide certain benefits — if, because of those requirements, an employer no longer receives a portion of a particular employee’s produce, he will lay off the employee.  But that is for another time.)

Now, to the second question, “Will that be sustainable in the face of globalization?”

Many people decry our loss of manufacturing jobs to cheap labor overseas.  Our trade deficit does have some effect on those job losses, as does improved efficiency.  However, in 1968, 43.2% of our “Personal Consumption Expeditures” were services.  That now stands at 59.8%.  We can only buy so much “stuff.”  We buy far less “stuff,” relatively speaking, that we did in the past, so naturally there are relatively fewer manufacturing jobs.

Service jobs tend to pay less than manufacturing jobs of the past, but they are less hazardous and physically demanding, too.  Harder work is generally rewarded with higher pay.  Meanwhile, cheap imports are, well, cheaper.  While making less, service workers can still afford more than those with the “good factory jobs” of thirty years ago.

Any economic shift can difficult to navigate, especially for those with few skills and experience.  Even for those with skills and experience, economic shift can be difficult if your skills are experience are outdated.  The Employee Benefit Research Institute reports that, while only 32% of current workers expect to retire before age 65, 62% of retirees actually did retire before age 65.  Of current retirees, 51% left the work force before they had planned to, some of that due to “work-related reasons” and “outdated skills.”

Unskilled labor will still find employment in construction, some manufacturing, and retail.  Skilled labor must keep their skills up-to-date.

Yes, we can maintain our (improving) standard of living, but it will not be easy.  Economic changes rarely are.