Labor arbitrage

Two common barriers to international trade are tariffs (politically imposed) and the costs of transporting goods across oceans. With the advent of the Internet, the decrease of the costs of telecommunications, and the possibility of near-instantaneous document transfer, the barriers to the trade of intellectual work product, which is essentially, any kind of work that can be performed on a computer (such as computer programming) or that makes use of a college education, have been greatly reduced.

Often, a prosperous nation (such as the United States) will remove its barriers to international trade, integrating its labor market with those of nations with a lower cost of labor (such as India, China, and Mexico), resulting in a shifting of jobs from the prosperous nation to the developing one. The end result is an increase in the supply of labor relative to the demand for labor, which means a decrease in costs and a decrease in wages.

Global labor arbitrage can take many forms, including but not limited to:

Capital moves to nations with cheap labor, lower taxes and or fewer environmental regulations or other costs of doing business for the purpose of producing goods and services for export to other markets. The classic example is the case of a factory or office closing in Nation A and then moving to Nation B for the purpose of producing goods or services at lower labor costs for export back to Nation A's market. This can result in layoffs for workers in Nation A. For example, in the United States, the amount of manufacturing jobs has decreased while the importation of manufactured goods from other nations has increased (along with the United States' trade deficit). These trends are now affecting the service sector as well.

Labor, often skilled and educated, moves to a nation on a temporary or permanent basis. This has the effect of increasing the supply of labor in that nation's market.

This type of labor importation may be advantageous. According to the National Venture Capital Association (NVCA), a registered political action committee, over 25% of all startups responding to an NVCA survey, in the San Francisco Bay Area of the US in the last 15 years were "immigrant-founded" (most likely former or current H-1Bs). 40% of all publicly traded and venture founded companies in high tech manufacturing were started by immigrants. These account for more than half of all jobs in this sector.

...
Wikipedia