The decline in U.S. manufacturing isn't just about labor costs. A crucial, overlooked factor is the disparity in savings. While Americans consumed, nations like China saved and invested in capital goods like factories, making their labor more productive and thus more attractive for manufacturing investment.

Wage stagnation is not accidental but a result of two concurrent policies. By sending manufacturing jobs overseas and simultaneously bringing in low-wage labor, corporations create a market where domestic workers lose nearly all leverage to demand higher pay for remaining jobs.

Ajay Banga explains that when interest rates are low for extended periods, capital receives outsized returns while labor's share of economic outcomes shrinks. This dynamic is a primary driver of rising inequality, as those who already have money are able to make even more.

Raising the minimum wage is a superficial fix for stagnant wages. True wage growth comes from two systemic factors: an education system that prioritizes valuable skill acquisition, and deglobalization, which prevents skilled domestic workers from being easily replaced by cheaper foreign labor.

Large-scale immigration programs, such as those for international students and temporary foreign workers, can be abused by multinational corporations. These companies use the programs to hire workers with fewer rights at artificially low wages, which drives down overall wages and displaces the domestic workforce.

Robert Solow posits that rising inequality isn't just an economic issue; it's a political one. Initial economic disparities lead to political inequality, which then allows the powerful to shape laws (like deregulation) in their favor, further concentrating wealth and reinforcing the initial inequality.

Beyond simple efficiency, Amazon's automation drive is a strategic financial maneuver. It's designed to transfer value from its human workforce—by eliminating jobs and associated costs like wages, benefits, and union risks—directly to shareholders through higher margins and customers via lower prices.

Helping the middle class is a matter of economic physics, not emotional appeals. The most effective strategy is to create a labor market where there are more jobs than workers. This is achieved by re-shoring manufacturing and controlling the influx of cheap labor, which gives domestic workers the leverage to command higher wages.

The most significant labor arbitrage today is not in low-skilled factory work but in high-skilled professional services. Raghuram Rajan highlights that a top Indian MBA costs one-fifth of a U.S. equivalent. This massive cost differential, combined with remote work, makes countries like India a hub for high-value service exports.