Stagnating Wages and the Future of Trade

Looks like the issue of wage stagnation is going to continue to be a hot topic, perhaps for some time to come--perhaps with unfortunate results. Since I first posted on this a while back, at least a couple of major pieces in major publications have visited the topic, with similar results. There was the much discussed NYT piece on falling real wages in August, and I highly recommend "The new titans" a survey in the Economist from last month. (Hmm, looks like the full survey may now be behind a subscription wall, I was able to download it for free last month.) While not conceding any ground to the protectionist camp, the Economist piece does conclude

The fact that many workers seem to be excluded from the spoils of globalisation is a big challenge to orthodox economics.... At the same time, protectionists exaggerate [the] costs and ignore the benefits. It is time for a more honest debate about trade.

The main economic theory being that the influx of massive amounts of labor and (relatively) less capital from the developing world will decrease the value of labor relative to capital. Greater supply, lower price (i.e. wages). This seems to be an alternate way of stating what Tim Worstall was getting at in the piece that inspired my first post. But it is indeed also rather Marxist, after all, which was what I had suspected.

So, what should be done about it? Maybe nothing, but growing inequities seem to be driving a backlash, which will almost certainly be counterproductive...