Low wages in China are not low when output per dollar of input is considered. Productiveness of those low wage workers would be less than that of American high paid workers if the tax and regulation burden were equal. Remove all the excess regulatory and tax costs and American workers are more productive- produce more gain for their employers- in the US than in China or anywhere else. Tax and regulatory costs are not amenable to employers’ attempts to reduce costs per unit of output. Employee costs are. In order to remain competitive when tax costs are high and rising and unavoidable and regulatory costs are high and rising and unavoidable, then labor costs must be reduced. Automation is one response and offshoring is another. Our tax and regulation regime is what makes offshore labor relatively more productive than domestic. The prospect of the tremendous new costs that are coming-some already arrived- is a huge new incentive to send manufacturing offshore.
Offshoring does not occur because offshore labor cost is less per hour than American labor cost or because it is less per unit of product(it is not). It is because labor cost PLUS regulatory and tax costs is higher per unit of output in the US than it is offshore.