ago, several U.S. manufacturers moved production plants to China in an
effort to cut labor costs. However, the age of cheap labor in China is ending
as annual wages for manufacturing workers continue to grow, and now, some of the
larger plants in China are looking for a new home.
Originally, toys, footwear, and textiles were among the first to go to China
decades ago. With 1.3 billion people, cheap labor in China seemed unlimited at
the time. But in the last two decades, this began to change as a
"frenzied" infrastructure and housing build-out caused a flourishing
economy that has grown nearly 12 percent per year. In addition, the Chinese
government raised the minimum wage 14 percent to 21 percent this year alone in
the five largest manufacturing provinces.
"We've seen our wage costs in China go up nearly 50 percent in the
last two years alone," said Charles Hubbs of Guangzhou Fortunique, which
is a medical supply company for some of the United States' largest health care
companies. "It's harder to keep workers on now, and it's more expensive to
attract new ones. It's gotten to the point where I'm actively looking for
alternatives. I think I'll be out of here entirely in a couple of years."
But where will plants go to next? Countries like India, Laos, Cambodia and
Vietnam are a few options for cheap labor. Also, some companies like Wham-O, a
toy company, are returning to the U.S. Last year, Wham-O moved 50 percent of
its Frisbee and Hula Hoop production to the U.S. According to a study by the
Boston Consulting Group (BCG), China's average wage rate was 36 percent of the
United States' in 2000, and by the end of 2010, this "gap" shrunk to
48 percent. By 2015, BCG predicts it will be 69 percent.
"So while the discussion in the short term favors China, the spread is
getting down to a smaller and smaller number," said Hal Sirkin, leader of the
study and senior partner at BCG. "Increasingly, what you're seeing [in
corporate boardrooms] is a discussion not necessarily about closing production
in China but about 'Where I will locate my next plant?'"
Production in China will not close entirely for most companies because even
though labor costs have increased, they're still cheaper than most other places.
Right now, the average manufacturing wage in China is about $3.10 an hour,
while it is $22.30 in the United States. In the eastern part of China, it is
about 50 percent more than the average $3.10 wage elsewhere.
China sees this new shift as a good thing. After the Foxconn suicides and high-profile labor
protests last year, wages were increased. Also, many multinational and Chinese
companies have relocated or even expanded inland for cheap labor, meaning that
people in Henan or Sichuan can find jobs closer to home and do not have to live
in a company dormitory. Manufacturing workers, like 24-year-old Wu Dingli, say
they prefer working closer to home, even if it means making a bit less money
than jobs further away.
"Life is much easier for me here because I'm closer to home," said
Dingli, who left an electronics factory job in Dongguan for a electric cable
supply job in Chongqing. "I much prefer this job to the old one."
In addition to making life easier for employees, rising wages will give more
money to the people, which will in turn increase Chinese consumption. This will
benefit Beijing's major trading partners, who can then decrease "drastic
imbalances" in global trade.
While exporters like Hubbs will feel the effect of higher wages, the bottom
line is that China is becoming wealthier with a stronger currency, and the time
of cheap labor is coming to an end.
quote: You are changing the argument. He said it's probably not labor that is worth it, you said it's not his decision rather it belongs to the market. While it is true that it belongs to the market, it's also true that often time union labor costs are to high on not sustainable in the long run, which is why businesses move to different states/countries (among a whole other host of reasons).
quote: I would also like to point out, unions are not FREE to collude, collusion is illegal. And, the over seas labor is only starting to not be cost effective in China, now businesses are just building factories in other countries, most of which do NOT include the US.
quote: So, as long as you are fine with losing jobs to other countries due to lower labor costs, then we have nothing to really debate. I, on the other hand, would rather not have unions driving the cost of doing business up to the point where it's no longer feasible to do business here. Just like Boeing and the Washington plant issue. Boeing is trying to move its manufacturing to other states, do you think Washington residents would rather keep the union or Boeing?
quote: I don't belong to a union, but understand why they are needed. Unions are the only voice middle-class workers have. Corporations have their millions/billion, lobbyists, etc. Who speaks up for the working stiff?
quote: Pardon me for saying, but isn't it businesses that at the end of the day agree to a contract with teh Union. If they're willing to pay...
quote: You can find case after case where unions drove jobs out of states, Pittsburgh is a great example.
quote: But you can see case after case where no unions are involved and the jobs disappear anyways.Look at the IT industry. No unions. But all the jobs are going overseas anyway.
quote: The fact is, corporations send jobs overseas whether or not there is a union. In fact, usually it's the unions that KEEP the jobs here, not the other way around.
quote: In fact, usually it's the unions that KEEP the jobs here, not the other way around.
quote: Wow, the ignorance here is astounding.
quote: Problem is, you wish me to take your OPINION as fact.
quote: I feel a system like this is far more fair than just saying--you're scum, you're useless, but hey! Make my product for me please. With a system such as this, the people working for you feel they have a real value and can clearly see how their contribution influences the overall process and product. If they work harder, their contribution makes a direct impact as more product is made and sold (assuming 100% sellthrough)--but, as you see, they would potentially share in the profits and this is a true motivator.
quote: I don't have a problem with people who want to work at a factory or some other blue collar job...
quote: But just earlier in the thread you called them morons, said they had no ambition and that a factory worker needs to have an IQ less than 80.
quote: You certainly think you're a lot better than these people. It sounds to me like you do have a problem with them.
quote: There seems to be an overwhelming sentiment that people are entitled to higher pay simply because they work long hours or "work hard". No. If you perform a menial task and offer no real skill then your pay should reflect that. Assembly line workers should max out around $10/hr total. If they want additional benefits, let that be deducted from their pay.
quote: in fact you actually need a sub-80 IQ to tolerate such tedious work.
quote: The work may be unskilled, but I'm not sure how most factory jobs can be done while going to college. I went to college, and getting even a b.s. in engineering was pretty much a full time thing.
quote: Let's be blunt: typical factory work is essentially unskilled, and is not a "career" - it categorically should not provide wages that support a family and give benefits.Assembling part A to part B on a factory line is minimum-wage work. It should be done by students working their way through college - so that they can gain valuable skills and land a job that does provide wages that support a family and give benefits.
quote: Says who? You're making a critical error in thinking that there is even a possibility that 200 million such jobs will exist for them to move in to after college.
quote: It might not be an easy transition, but automating and outsourcing manufacturing will allow more people to be employed in high tech fields and keep up our rate of technological advancement.
quote: If you want to make a huge amount of money without much of an education, get in sales, be extraordinarily lucky, or both.
quote: learn a skill that's worth paying you a non-minimum wage for.
quote: until we bring manufacturing back home
quote: If this doesn't also serve as a dual indictment of our failed worth-ethic as a nation in terms of our young and of our education system I don't know what does.
quote: China's average wage rate was 36 percent of the United States' in 2000, and by the end of 2010, this "gap" shrunk to 48 percent.
quote: Right now, the average manufacturing wage in China is about $3.10 an hour, while it is $22.30 in the United States.
quote: Where do the first numbers (48%) come from?
quote: Except that doesn't work. $3.10 an hour is 48% of about $6.49, well short of the federal minimum wage.
quote: I guess it's the unionization of the employees that makes Kroger so much more expensive than Wal-Mart... um... er...
quote: China is becoming wealthier with a stronger currency, and the time of cheap labor is coming to an end.
quote: China didn't embrace capitalism.