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Dramatic Shifts In Manufacturing Costs Are Driving Companies To US, Mexico
hackingbear writes: According to a new Cost-Competitiveness Index, the nations often perceived as having low manufacturing costs — such as China, Brazil, Russia, and the Czech Republic — are no longer much cheaper than the U.S. In some cases, they are estimated to be even more expensive. Chinese manufacturing wages have nearly quintupled since 2004, while Mexican wages have risen by less than 50 percent in U.S. dollar terms, contrary to our long-standing misconception that their labors were being slaved. In the same period, the U.S. wage is essentially flat, whereas Mexican wages have risen only 67%. Not all countries are taking full advantage of their low-cost advantages, however. The report found that global competiveness in manufacturing is undermined in nations such as India and Indonesia by several factors, including logistics, the overall ease of doing business, and inflexible labor markets.
Chinese manufacturing wages have nearly quintupled since 2004
They're going to have growing pains. Developing a middle class and shifting from expendable factory workers to knowledge workers doesn't happen overnight. We had our own struggles during the era of the robber-barons. I hope they have an easier time of it.
Another race to the bottom.
I wonder if the landing is going to be soft and comfy.
Faster! Faster! Faster would be better!
When it gets down to it — talking trade balances here — once we've brain-drained all our technology into other countries, once things have evened out, they're making cars in Bolivia and microwave ovens in Tadzhikistan and selling them here — once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel — once the Invisible Hand has taken away all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity — y'know what? There's only four things we do better than anyone else:
music
movies
microcode (software)
high-speed pizza delivery
.
Prisencolinensinainciusol. Ol Rait!
Manufacturing doesn't employ that many people anymore.
You can locate the machines in a legal jurisdiction you control, and watch your capital. Of course it's moving here.
What isn't moving, of course, are jobs.
First "blame BOOOOSH!!!" post.
(posted by iPhone from Golf Cart 1)
The cynic in me thinks this is just the next chapter in globalism: now that moving work overseas has crushed wages in your real market, you can make your product in that market and save on shipping.
Are we in a race to the bottom or the top?
If manufacturing's biggest variable cost is labor, companies will flock to the place where their variable costs are the lowest.
So, the question is, have we started to reach wage parity now by virtue of wage reductions in the USA (race to the bottom) or the fact that wages in places like China have reached parity?
IMHO, it's both. The standard of living here in the USA has stagnated just like the last 6 years of the economy and the demands of labor outside the USA has driven costs up. But we are severely limited in this country because we face a huge increase in energy costs once the economy starts to actually do more than tread water. Manufacturing won't return, not yet.
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
in the environment.
Unless that is what they mean by "overall ease of doing business".
The socially corrosive mentality that one class of jobs, usually technical and electrical engineering, can be mercilessly outsourced needs to stop.
Lower-value service jobs like accounting, lawyers and notaries are immune to this phenomenon.
It's also good that more Chinese can earn better wages and hopefully benefit from the technology they are actually building.
Mostly random stuff.
"while Mexican wages have risen by less than 50 percent in U.S. dollar terms, contrary to our long-standing misconception that their labors were being slaved."
Mexican wages rising less than China's doesn't mean that they're wages aren't still low. Where are you getting this misconception about misconceptions? It's not in the linked article.
Watch Republicans campaign again to get rid of the minimum wage.
2nd world is (was) the Communist bloc.
US culture and Mexican culture have more in common than US and Chinese and India cultures. There is a lot of US culture influence into Mexican culture, for example TV shows and movies, Christmas stuff, etc. This means that Mexican workers and managers are more likely to understand American's way of work than people from China and India. Both countries also have almost the same timezones, so there is a big overlap in working hours. This facilitates meeting hours. No more 6 AM and 8 PM meetings. If you have to go to visit the factory, you're only 2 to 6 hours away, not 20 hours o more.
US wages are not flat. They're declining. Adjusted for inflation and the cost of living increases, your effective purchasing power is 1/3rd of that of your grandparents.
Your parents and grandparents were able to buy a house, two cards, and send 2 children to college on a single income. You can't. You can't even with you and your spouse working full time with decent jobs. Your children will need loans to go to college and you will need to fork out a lot of money for childcare while you both work. You should probably pay for private tutoring too, to make up for your lack of time with your children you spend working. (Parental involvement in education is key to educational success. THE number one factor. It's why lower income people stuck working 60+ hours a week with 3-5 part time jobs have children with bad educational outlooks)
Point is, you're getting screwed. The income gap between the wealthy and poor has increased exponentially in the last 30 years. And it's no accident. There are people working hard to make sure you and your children grow up stupid, in to a life of perpetual debt and poverty.
We wanted to shift manufacturing back to the US, and now we've done it (thus making Americans the new slave laborers)!
Somehow, I don't think this is how we envisioned it.
quote:
<ul><blink> persistent sluggish growth or recurring asset bubbles.<blink><ul>
nah, that does not sound at all familiar...
To lower-cost SE Asia and African countries.
If all these nations develop and no longer manufacture who is going to build my Rockem-Sockems? Walleeeee!
Have you ever been to a third-world country?
Have you lived there?
Because I think it's quite apparent that you don't have a clue what you're talking about. But here's a quick'n'easy test: Our poor are fat. Their poor are skinny.
The real problem is that other nations continue to manipulate their money relative to the $.
China,
Indonesia,
India,
vietnam,
etc. are but a few.
As long as this is ignored, then manufacturing will continue to stay with those nations that manipulate the most.
What is really helping move this back is NOT so much costs, but the fact that the younger generation are saying no to this and working hard to bring it back. Look at how Target, and Walmart are doing. These are basically front companies for these other locations. They are having no choice but to start bring back North American products.
I prefer the "u" in honour as it seems to be missing these days.
When manufacturing comes to the US, it is mostly done by robots and other forms of automation.
So, manufacturing coming back isn't all that it's cracked up to be.
It's a joke re the only thing that seems to be trickling down is the global minimum wage.
China also has a long history of violent peasant revolt, so i'm sure it will work out one way or another...
HA! I just wasted some of your bandwidth with a frivolous sig!
It doesn't cost anything really to ship software or service support / customer support. If the wages are even a bit lower I would suspect that a lot of those jobs will stay offshore. Some might come back because it is can be more hassle than it is worth resulting in bad product when using offshore programmers. Then again, it is the MBAs that often make the offshoring decisions, so who knows what their tiny little brains will come up with.
-- I ignore anonymous replies to my comments and postings.
This is the inevitable consequence of outsourcing. We've altered the local economies of those countries and the sucking sound is reduced, and so now the "outsourcing" will flow where the vacuum is now strongest... which perhaps just happens to be right here in our own back yards again.
What goes around comes around. Or something like that.
This is complete BS, they come out with nonsense studies like this all the time.
My father works in manufacturing, they don't like going over seas, you have a hard time controlling quality, ensuring design specs, etc...
But there is no way they can stay in business without it.
According to my father, when doing analysis of where to send work The total cost of labor (including benefits an such) are roughly as follows:
US: $15/hr
Mexico: $1/hr
China: 10cents/hr
The minimum wage is mexico is $5/day, so yea...
China has the benefit of the manufacturer paying no benefits at all and the government keeping the employees healthy.
There are added costs like shipping, bribing government officals etc...
But the costs would have to be huge to make up the difference between $15/hr and 10 cents per hour.
Where US workers come into the picture is to save money on shipping. If you can send the product over in pieces, save a ton on shipping and then have the final product assembled here, you can get the best of both worlds.
"contrary to our long-standing misconception that their labors were being slaved."
No, in some of those countries (e.g China) they were slave labor during high production times of electronic devices, when to get college credit, students were pulled out of their classes and forced to work for free at a plant.
http://www.huffingtonpost.com/2013/10/10/playstation-4-foxconn-college-students_n_4078704.html
Thats slave labor and its still in America with the disability pay scale at some of our factories.
Because the U.S forces the oil producing countries to deal only in U.S. dollars, no matter what they pay their workers, the developing nations have to sell their product at a loss in the U.S. to get the U.S. dollars necessary to buy oil.
Literally the opposite of the point of the article we're discussing, but sure. Why not. What a joke. Haha.
I think it's you who haven't been to many third world countries. Yes, there are countries with famine, but there are plenty of poor fat people in Nicaragua, Fiji, Egypt, Brazil, etc. I think that we are seeing a convergence in many aspects of life between the US and what everyone calls the third world. Belize looks kind of like Mississippi. Costa Rica and Mexico actually look better. We still have the lead in institutions - our courts work better, our cops are fairer, and our customer protections are more robust than any place in the third world. But I think these are the most important differences between the first and third world. Outright famine still happens, but is certainly the exception even in the latter.
No one on the face of the planet does Puritanism better than Americans. From birth, we're close-order drilled that work is the *only* ethic, to the point that by the second week of vacation (if it exists), the average American worker starts to feel twitchy, as if they're 'cheating' by not working, or they won't be missed and thus discovered to be irrelevant by the queen and drones.
And this - with a little help from the One-Percenters - is why there will never be a Star Trek style future, where one works due to passion and not subsistence necessity.
that these companies can exploit a global workforce but I can't exploit a global job market? Must be nice to be allowed to freely move around the world...
Given the cost of labor, geographical proximity and ease of distribution thanks to NAFTA, I'm surprised more companies aren't setting up manufacturing in Mexico. In one of the more stable states, not the heads-in-a-duffel-bag / threatening to collapse the government states.
Oh wait, I just answered my own question.
THIS SPACE INTENTIONALLY LEFT BLANK.
American workers are now competing to offer their labor at the lowest possible cost. Improving public education has helped; American workers are beginning to understand and accept that they have no other choice.
I comment occasionally so that I can mod others -1 overrated or -1 offtopic.
It's interesting to watch how things oscillate from one extreme to the other. In computers, it's the shift from terminals connected to mainframes, to PCs, to terminals that look a lot like a smartphone, and now a little bit back towards PCs. I'm guessing this insourcing trend will start swinging back the other way once labor here gets too far above the price levels it's at now.
The company I work for basically the opposite of leading edge -- we do IT services for a very staid, downtime-averse, risk-averse industry segment. They're just starting to figure out that offshoring whole development groups isn't giving them the savings they predicted, a fact that most companies realized a lot sooner. So not every industry oscillates in phase, but the pattern is everywhere.
Serious question though, for those with experience...one of the most often cited problems US manufacturers complain about is the lack of skilled factory workers. What exactly do people need in the way of skills that they didn't have 20-30 years ago when the manufacturing was offshored originally? If it's just running CNC equipment or similar, isn't all the programming and such done by the engineers? What is the skill they need?
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fuck you fuck you fuck you!
Move your manufacturing to Canada. We can move parts and products between the U.S.A. and Canada by trains, planes & automob... I mean trucks. Just don't mess around while driving on the highways.
Get free satoshi (Bitcoin) and Dogecoins
Canada is better, eh? We don't have worms in our alcohol.
Get free satoshi (Bitcoin) and Dogecoins
Oh, they just found out it's more expensive? Good for them, except they should have figured out that waiting 4 weeks for your product to be replaced if you sell it all when it would be 3 days in the US loses you tons of money regardless of worker wages. You just cannot have your business rely on another business thousands of miles away. Don't even get me started on the level of fraud and quality issues. Chinese manufacturing costs A TON once you look past the surface. Everything should still be made in the US!
Fuck The Federal Reserve
Honestly, I'd list those countries at a higher scale than the absolute Third World. In the Indian subcontinent, Madagascar and parts of Sub-Saharan Africa, there are still millions of people who are badly nourished, who expend an enormous amount of effort every day in unskilled labour but whose sustenance consists of a mere handful of a staple food (white rice, cassava, cornmeal, bread) with little or no ingredients added. Central America and the Middle East is significantly better off.
Sometimes even the rich are skinny, because of poor food availability for decades.
One of the reasons Russia and Eastern Europe produce beautiful ladies like there's no tomorrow. In all fairness, they wouldn't have been considered "beautiful" 60 years ago, but tastes change.
...gis sdrawkcab (usually not responding to ACs; don't bother posting as AC)
Rush is Canadian, it was a given that Canada took first place. The real fight is for who's in second place
The poor in Egypt were motherfucking skinny. At least they were in 2008. Maybe you were looking at the shopkeepers or taxi-drivers, or tour guides who spoke English.
Same for Peru. Also went through the Caribbeans, but never really saw the poor there.
Costa Rica is doing just fine. That was a pleasant experience. Nice enough I felt fine just driving around by myself. I'd feel fine accepting them in as another state if it weren't for my OCD demanding there be an even number of states.
Outright famine still happens, but is certainly the exception even in the latter.
I was going to give you shit about saying that first world nations experienced famine, but then I looked up the actual definition of first, second, and third-world nations. I thought it just meant established vs poor-as-shits-ville. Rather, it's a hold-over from the cold war. But sure, if you consider Oman first world, then that's totally legit.
Since you found it funny, why don't you explain the joke to me.
I could see some humor maybe of they were somewhat related but pulling shit out of nowhere just doesn't give the giggles you seem to think it does.
Right, because the US has never had QE1, QE2 and QE3 starting back in 2008. Only the countries listed above manipulate their currency.
. If you can send the product over in pieces, save a ton on shipping and then have the final product assembled here, you can get the best of both worlds.
So by shipping the entire thing to the US in pieces you save money vs shipping it as a completed item? Dont most shipping companies charge by weight/distance (the Ton/mile, etc)?
Your are also mistaken here as well.
By doing the "final assembly" in the US they get around some duty/import rules.
So all the benefits go to the company. Cheap labor assembled the product to a high percentage. If it was imported as a completed item there would be punitive duty so hire cheap unskilled labor in the US for "final assembly" and get around those rules.
See "chicken tax" for an example of bypassing duty
http://en.wikipedia.org/wiki/Chicken_tax
"There are added costs like shipping, bribing government officals etc..."
Overseas they call it bribery, locally they prefer "lobbying"
The summary talks about "inflexible labor markets".
Yes, some population write laws that protect human beings from exploitation. I would not call it "inflexible", but "protective", or just "human"
Dramatic Shifts In Manufacturing Costs Are Driving Companies To US, Mexico
They're only interested in Southern or Southernized states, which is not representative of the US. That is, they're only interested in places with a well-defended "know thy place" mentality where labor is rendered servile.
Any deviance from said philosophy is severely punished, whether it be by individuals or corporations. In the case of individuals, it is measured in legally-friendly terminations, designed to break support. In the case of corporations, especially the precedent-setting Volkswagen, interest groups will threaten to take out tax incentives or otherwise hobble the company.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
Unlike CHINDIA, USA can export its inflation to rest of the world with https://en.m.wikipedia.org/wik...
Casteism