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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.
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!
I'm gonna disagree.
This is supposedly a sign that the race to the bottom is actually done. The bottom filled out and is rebounding, and "we" mostly resisted our worst political urges vis-a-vis protectionism and removing regulatory protections that exist for good reasons. An equilibrium has been reached, and all the sacrificing has been mostly of the short term kind.
I know posting anything that isn't a hyper-cynical prediction of doom-and-gloom isn't too popular on slashdot, but this happened with Japan in the early 90s, and it happened with the United States(to the British Empire) in the 1850s. This isn't an unprecedented development. Cheap labor isn't infinite and eventually labor starts to get positively valued again.
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.
Yes it is. Stop viewing it as crushing wages and more a normalization of wages. It takes time to cycle out bad habits from manufacturing companies here int he US (and in some part due to labor unions although unions are not all bad).
For example i've seen plants where people work their way up, as they have more years, and as they gain higher pay, they move to different jobs. But the reality is you shouldn't have a 30-50$/h person driving a fork lift. But due to the way they organize them selves and their people that is what you see.
I'm all for a fair wage for a fair job. But that wage should be based on the contribution to the goals, to the product. And as someone moves up in rake and wage they should be expected to contribute more value.
The mentality that everyone is entitled to an x% wage increase for every year of service for the simple fact of being there doesn't make sense. Doing it because they increase their knowledge and skills that can be contributed back to the organization does make sense.
The off shoring of jobs to 3rd world conuntries for manufacturing due to cheap labor that they could abuse is also a failing of the company, but it is made possiable in part by the 1st world workers not being able to show the value added for the ratesthey command. As this balance equalizes the rates and contribution should also. At that point (and what seems to be happening) is that the offshore people are starting to command more for the value they are giving, and with that there comes the question of if the difference in labor costs justifies the increase in logistics cost. There is a tipping point where the difference will cause the Jobs to move back, and be more distributed.
When it comes to logistics costs, unless you are in extreme high capital investment processes (thing IC Fabrication) normally the Cost of Goods Sold (non-capital) are they moving costs which are lowest when you do manufacturing within the region of sale. By the labor gap closing, the best place to increase margin is to make adjustments to the logistics costs, which means changing how you do business.
But over all this is good, this is a very good thing. the closer all global labor markets are, the more likely the manufacturing will be to distributed so that you are preforming the work in the region of sale. once this happens the supply & demand for any given region should level out, and you should see better balanced net imports/exports. Rather than any single economy being unbalanced. once you get balanced then the life of the average worker will on average get better and more stable.
Again, this is a very good thing, it is a long and ever changing road, but just like the universe this is, as the nature of all things, a move towards less entropy and is natural in any system.
'...if only "Jumping to a Conclusion" was an event in the Olympics.'
It wasn't always like that though. Blame globalism if you want; but in the post war years, DETROIT was the richest city in the United States. It did not get that way due to service industries and intellectual property creation. They took raw materials, and made cars. for profit. and did not pay slave wages. The rust belt was bedrock of the American middle class.
I do not buy the argument that manufacturers have to pay shit wages to stay competitive. I think that's an excuse to either inflate managerial / executive salaries; or cover up for failing to invest in increasing efficiency.
Or it's due to the rise of the MBA. Labor is simply an input, a cost to be minimized. There's knock-on effects to selling your workers out in order to slightly lower production costs -- and those goons didn't look at the bigger picture or what we'd lose -- a stable, well functioning, organized society (Look at Detroit/Flint/Gary in 2014)
(In before some libertarian blames government regulation for companies moving production offshore.)
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!
Exaggerate much? Republicans don't want to get rid of the minimum wage.
You should try paying attention.
"I think it's outlived its usefulness," said Rep. Joe Barton of Texas. "It may have been of some value back in the Great Depression. I would vote to repeal the minimum wage."
http://www.nationaljournal.com/white-house/can-obama-unilaterally-raise-the-minimum-wage-20131205
I submitted my previous post to soon. You could dismiss one Congressman as not representative of the party.
So here is the official 2014 platform of the Republican Party of Texas.
Minimum Wage Repeal- We believe the Minimum Wage Law should be repealed.
Prevailing Wage Law- We urge Congress to repeal the Prevailing Wage Law and the Davis
Bacon Act.
Workers Compensation- We urge the Legislature to resist making workers’ compensation
mandatory for all Texas employers
http://www.texasgop.org/wp-content/uploads/2014/06/2014-Platform-Final.pdf
Well, that depends on the amount the jobs pay, doesn't it? Have average salaries for manufacturing jobs (with respect to inflation) increased, decreased, or remained the same over the past 20 or so years?
That's how you can have an increase in the number of jobs while simultaneously collapsing a middle class. You can also convert full-time positions with benefits to part-time positions without, decrease sick and vacation days, require people lucky enough to have health benefits pay increasing amounts for them, etc., not to mention taking actions that simply raise stress in people's lives like making people work more erratic shifts, threatening them with off-shoring or outsourcing, basically any psychological gambit that makes the employee feel powerless - which has the follow-on effect of making them too cowed to asked for a fair share of the company's profits, again leading to less money for what was equivalent or better work. Plus that latter thing makes it less likely that workers would organize as a labor block or politically in their communities - a fine multiple win for the factory owners vs. their employees.
So yes, I can see several ways that a middle class can be hollowed out, even while increasing numbers of even worse, lower-paid jobs are created (and taken). That you don't see how this doesn't make things better for most demonstrates that either you are unaware of how the real world has been working for quite a while or you have some sort of odd ideological ax to grind.
That is all.