The notion of a 'race to the bottom' assumes that all countries and their people are in
perfect competition, that the supply of
employment is fixed (aka
lump of labor fallacy), and
investment does not contribute to economic or social
welfare.
Some points to consider:
Companies do not relocate willy-nilly. Moving a factory will require a sufficiently trained workforce, which may or may not be available. Countries which have been the most successful in attracting investment have not necessarily been those where wages are the lowest, but rather those with a good standard of education. Productivity gains are likely to be higher in those countries.
Relocation comes with its own inherent costs and risks. Trying managing a software development project when your business analysts and programmers are twelve time zones apart, and you can have two legal systems who can give different verdicts to a case of he said she said.
Companies relocate not necessarily to make cheaper widgets, but in order to sell their widgets to foreign markets. Developing countries generally offer preferential treatment to foreign investors who will employ their citizens, over exporters who will nonetheless may be welcome if they pay the requisite tariffs. And it makes sense to use a cheaper cost base to make cheaper widgets which you will sell in these markets.
Investment does not make countries receiving investment look like third world nations. As a country makes things, it earns income from what it sells, which in turn increases incomes. More widgets on the market reduces their costs and makes them available to more people. And with more disposable income, people will spend their money in the labour-absorbing services industries.
The people in countries receiving investment don't like oppression, unfair labour laws or sucking in noxious fumes any more than those in developed countries. Countries with poor human rights records tend not to attract the best and brightest workers. An opaque dodgy legal system is also just as likely to frighten away investors. As has been seen in South Korea, Lebanon and Jordan for example, once people are sufficiently affluent they will want their drinking water potable and their governments accountable.
Corporations may seek to influence the host government to ease restrictions on foreign investment, such as tariffs which handicap them competing in their host countries. Ultimately consumers end up paying for tariffs - they are forced to either pay the government for the right to use a foreign brand, or settle on buying an inferior widget from a domestic protected company.
Relocating does not necessarily create unemployment in the countries that loose investment. I wasn't worried when the steelworks in my country were relocated to China, because I never aspired to be a steelworker. The consumers in the countries where foreign investment has headed will aspire for the kind of goods that the developed world still has a comparative advantage over. Often these are in the services or niche manufacturing industries. However, the conditions for the developed world to remain competitive depends on (a) a workforce with developed world standard of education, and (b) a regulatory environment conducive to businesses. In the developed world Nordic model and Anglo-Saxon model countries have managed to thrive with globalisation, while Rhineland model and Mediterranean model countries are floundering.
I guess the morale of the story is to be one step ahead of the game. Learn how Western women have silently adapted as work for seamstresses, typists and call centre staff have disappeared. Get a job in something that is difficult to relocate, like nursing or computer programming in something niche. And when that avenue of work disappears, try being an internet content provider before Bangalaore beats the Anglophone West in having a comparative advantage in glibness. E2 is good practice.