Efficient Production

There is a fundamental economic principle which is that production will migrate to the most efficient method.

This is simply because the most efficient method will be able to compete better than all the other methods.  This is not an instantaneous change, although it can happen rapidly at times.

You also have to consider what is the discriminating factor.

Certainly coffee made at home is more efficient in price than coffee bought outside, but the second may actually be more efficient from a time perspective, especially considering the range of choices provided.

Still certainly for commodities and manufactured items, price is usually the deciding factor.

This has led to the decline in American manufacturing as advances in trade and transportation have allowed other countries to compete effectively in our markets.

The more significant labor is as a cost, the more competitive cheap labor countries become.  Of course we are also replacing expensive labor with robots and automation leaving us with our current situation, which is to some extent a real crisis.

Communities that were thriving with a local manufacturing plant are in many cases faced with real economic hardship as those plants have closed.  Those that have stayed open have oftentimes survived by automating and eliminating jobs.

Labor is obviously people and our economy is consumer driven, once again people.  People who make less spend less.  Sometimes not at first, they dip into savings, home equity, and incur credit card debt, but eventually those sources dry up.

Eventually some new equilibrium is reached, but to get there a lot of pain is required.