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Foxconn workers  (Source: Kotaku)
A growing Chinese economy and a need to tend to manufacturing workers' needs has upped the cost of labor

Years 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.



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RE: Good...
By 91TTZ on 6/20/2011 11:46:39 AM , Rating: 5
$22.30 isn't minimum wage.


RE: Good...
By Motoman on 6/20/2011 12:11:05 PM , Rating: 2
Correct. And if it's a union job paying that wage, it's probably not laboe that's worth it.


RE: Good...
By room200 on 6/20/2011 1:31:02 PM , Rating: 3
Who are you to decide what a person's labor is worth? You wouldn't get paid the amount if you wern't worth it. Otherwise, if they could get it done cheaper elsewhere, they'd do it. The laborer is getting paid what the market will tolerate.


RE: Good...
By weskurtz0081 on 6/20/2011 1:52:29 PM , Rating: 5
You can find case after case where unions drove jobs out of states, Pittsburgh is a great example. So, while you are right, the person you responded to doesn't make the decision of what labor is worth, unions throughout history have been known to drive the cost of doing business higher than the business could afford, thus driving business out of that area. So, you are kind of right, history shows, businesses DO go elsewhere and get the same product/service with lower costs.


RE: Good...
By Motoman on 6/20/2011 2:05:07 PM , Rating: 4
No, the point you've made shows that he's *not* right.

Unions drive the wage up far past what the market would normally bear for that labor. Which is why the business ultimately either goes bankrupt, or overseas. In either case, the union always screws the workers they were supposed to be "protecting."


RE: Good...
By weskurtz0081 on 6/20/2011 2:10:28 PM , Rating: 2
That was my point though, in kind of a smart ass way. My main point though is, not ALL unions cause this sort of problem, but most of the big ones that we all know about are guilty of doing exactly that. They have too much power (and thank god the employee free choice act didn't pass) over the employer and the only solution ends up being to move or shut down.


RE: Good...
By room200 on 6/20/2011 2:53:09 PM , Rating: 2
Unions are free to do what businesses do all the time; they speculate, gamble, collude, etc. to drive up the prices that you and I pay. Furthermore, your argument that businesses fail when prices get too high they go overseas? As you can see the whole point of the article is it's only a matter of time before that cheap overseas labor isn't so cheap anymore and it becomes more cost-effective to make your crap at home. If the business fails? Isn't the idea of the free market let them fail and another will takes its place?


RE: Good...
By weskurtz0081 on 6/20/2011 3:39:09 PM , Rating: 4
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).

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.

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?


RE: Good...
By room200 on 6/20/2011 4:39:19 PM , Rating: 1
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).


You keep using terms like "too high". Too high according to whom? My point is that, according to this article, businesses may move to other countries but there will come a time when it is no longer cost-effective to do so.

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.


Of course collusion may be illegal, but companies do it all the time. i think it's a given. And there will come a time, as in China, those other countries will eventually say "No more cheap labor here. Pay us more or leave."

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?


Please, let's be honest here; it isn't about driving up the cost of business so that it's not feasible to do business. It's that the companies large enough to move have said we want to make HUGE profits. There is no amount that will satisfy them. Even when they are making such huge profits, they still compalin about taxes and they still don't hire.

What good is keeping low-paying jobs here that would actually serve to keep people poor and living on the street? There many working people who are homeless. I keep hearing these posts about self-worth, education, and othe judgemental nonsense. There are a bunch of people with degrees who are homeless, and I'm sure they thought they were irreplaceable at one time too.

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?


RE: Good...
By someguy123 on 6/20/2011 10:08:42 PM , Rating: 2
I don't see how it's fair to justify being conniving based off speculation. Public businesses need profits to satisfy their investors as well as themselves. If the business isn't turning a profit they hurt their investors more than their own board's pockets.

There's much more at stake when you're attempting to suck more dollars out of a company you assume is paying too much to their executives. You end up hitting a lot of the public investors, as well as the local economy if the business is driven out.

Unions should base their goals and wages on free market competition, not on the assumption that their management is too rich and that they "deserve" more money for the same work, even though they can't find jobs that deliver more money.


RE: Good...
By Fost04mach on 6/22/2011 5:38:25 PM , Rating: 2
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?


Explain to me why a middle-class worker needs a voice louder than his own - on his own two feet - walking off the job if he's not happy? If a job is really paying too little, nobody will do it. You don't need a union, or government, to force the wage higher. The corporation will have trouble finding attracting labor if their wages are too low.

The working stiff speaks for himself. If he doesn't like what he's making at company X, he's free to move to company Y that pays more. If he doesn't like what company X and Y are paying, he's free to do something else. If you don't like that bolting lug nuts on a car "only" pays 20 bucks an hour, feel free to do it somewhere else where you get paid more, if you can't find it and you still don't like it, whining isn't the answer, stepping up to bolting cylinder heads or whatever, that pays 21 bucks an hour will do it. Don't even get me started with teachers' unions...


RE: Good...
By gamerk2 on 6/20/2011 3:52:01 PM , Rating: 2
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...

Secondly, high wage jobs is a requirement for a growing economy. High wages increases demand for goods, increasing sales, thus increasing demand for jobs. The rush to lower wages is one of the things killing the US economy, as consumer spending is no longer sufficient to grow us out of hard economic times [as we are currently learning]. Of course, GREAT for coorporate profits though, but not so good for the US.

Whats happening in China is not surprising: Demand for goods [both locally and overseas] is casuing a demand for workers [to make more product and thus more profit]. Their increased spending spurs more demand for goods, and thus to attract more workers, higher wages are offered. Those wages farther increase demand, thus spurring higher wages.


RE: Good...
By weskurtz0081 on 6/20/2011 4:02:21 PM , Rating: 4
Sure, the business agrees to the contract, and then they charge more for the products, in some cases the alternative is a strike.

Point 2- so, what happens when the high wages make the product the company is producing less expensive than that of the competition? Do they just keep producing the product that costs more to sell and just hope people will pay for it? It's not nearly so simple as saying "as long as wages continue to increase, everyone in America will be fine", we are not isolated, we sell products that are made in other countries.

Point 3- and then China will likely have the same problem we have, they will lose manufacturing to other countries because it's more cost effective. See how that works?


RE: Good...
By Motoman on 6/20/2011 8:02:21 PM , Rating: 2
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...


Red herring. Because of the protection that unions get from the government, once they're in your plant/location, the only way to get them out is to shut the plant/location down.

So, you either acquiesce to the union's demands, or you shut the plant down. Unions have the company over a barrel once they get in...


RE: Good...
By Fost04mach on 6/22/2011 5:54:38 PM , Rating: 2
It is the business that agrees... Because if they don't the employees go on strike, and by law, they are not allowed to fire and replace them. So as a business owner who wants to keep producing, what do you do?


RE: Good...
By FauxNews on 6/20/2011 9:15:42 PM , Rating: 3
quote:
You can find case after case where unions drove jobs out of states, Pittsburgh is a great example.


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.

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.


RE: Good...
By weskurtz0081 on 6/21/2011 10:25:12 AM , Rating: 1
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.


You might want to take another look at my post, I also mentioned that they travel to other states that are right to work states.

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.


I would love to see your stats for that.


RE: Good...
By Motoman on 6/21/2011 3:38:01 PM , Rating: 2
quote:
In fact, usually it's the unions that KEEP the jobs here, not the other way around.


Citation needed.

That is the hugest ball of crap that has ever been crapped in the history of crap.


RE: Good...
By EricMartello on 6/20/2011 2:38:15 PM , Rating: 5
Wow, the ignorance here is astounding. You think people are being paid "what they're worth" and not what government mandates and union policies force employers to pay? A factory job is not $20+ an hour work. The morons working at an assembly line perform one repetitive task over and over...in fact you actually need a sub-80 IQ to tolerate such tedious work. There is no reason they should be earning any more than a burger flipper at McDonald's...in fact, working at McD's takes more skill than working an assembly line.

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.

The world does not need to cater to or support people who with no ambition and only a desire to scrape by doing the bare minimum. Unions are relics that should have been disbanded long ago, and keeping these overpaid, underperforming schmucks employed simply for the sake of "keeping jobs in america" is a failed policy that only drains our economy.


RE: Good...
By room200 on 6/20/11, Rating: -1
RE: Good...
By BansheeX on 6/20/2011 3:10:23 PM , Rating: 5
What he's trying to say, in summary, is that if pretty much anyone qualifies for a job, then it's a much larger pool of people underbidding each other in the sale of labor. Unions try to to defeat that process by collusion "psst, let's not undercut each other's prices." But you can only collude in your locality, so the company will go bankrupt or move.


RE: Good...
By room200 on 6/20/2011 3:04:59 PM , Rating: 1
quote:
Wow, the ignorance here is astounding.


I though the same thing as I read your post. Problem is, you wish me to take your OPINION as fact.


RE: Good...
By guffwd13 on 6/20/2011 4:19:26 PM , Rating: 2
quote:
Problem is, you wish me to take your OPINION as fact.


Don't bother preaching that one here, I keep trying to say argument is what makes the world go round and I constantly get voted down for it.

I actually agree with some of the things he said, but I don't agree with the idea that there's only one right answer.


RE: Good...
By room200 on 6/20/2011 4:46:07 PM , Rating: 2
Frustrating, ain't it?


RE: Good...
By MrBlastman on 6/20/2011 4:55:38 PM , Rating: 4
I argue that to pay someone what they are worth is instead not a function of their IQ, but instead a function of the percentage of work they contributed to the total net sum required to put the good to market.

i.e. Say one guy invents the product--well, his net sum contribution is great indeed, as far so as possibly 50% the net sum if he funded his research entirely himself. The remaining 50% is the actual manufacturing of said product.

Now, say the creator invented it, but, he hired some basic individual with a high school education to manufacture the product. The creator then outlines a process for the laborer to follow to a T--all he needs to do is follow the instructions. As such, when the product is indtroduced, only the single laborer is needed to make the product.

Now, without the creators instructions, the laborer would have been useless, so, we can net the creators manufacturing contribution to be 25% total net sum and the laborer to be 25% total net sum.

Once it is all finished, we have the creator's portion of the net sum at 75%, the laborer's at 25%. Thus, once the product is sold and the material and marketing costs are deducted, the creator receives 75% of the proceeds, the laborer receives 25%.

Wait, that's preposterous! The laborer only performed menial labor. That is the case, but, as production scales up they will potentially receive less--they will still receive a fair portion of the proceeds from their contribution to the overall efforts. The creator would be nothing without the laborer as the creator wouldn't have time to run the assembly-line, so, the laborer provides a very real contribution to the process.

Call them dumb, call them ants, call them peons--call them whatever, just don't discount someone because you think their role in the workplace is minscule. I would hate to work with or around you. EVERYONE I work with, large or small, is important to me. They're people, like you and I--and I don't refer to them as morons or look down upon them.

Of course, my view is idealistic--as it does not account for ownership. It is a raw scenario. The function of ownership--or, the percentage paid out in profits, would be based on the amount they relied upon the creator to come up with such good and their overall financial contribution to get the system running. In the end, the creator's net portion could be reduced to something like 40% and the laborer would also need to be reduced proportionately as without the investors, the laborer wouldn't be making squat, thus--the proportionate figure for them would be 13.3%.

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.


RE: Good...
By EricMartello on 6/20/2011 8:11:47 PM , Rating: 2
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.


I don't have a problem with people who want to work at a factory or some other blue collar job...but I do have a problem when these same people expect that job that can literally be filled by just about anyone demanding that they get paid more, either because they worked there for a long time or simply because they feel they deserve more.

Let's say that you start doing a menial job for minimum wage. It doesn't matter if you stayed there for 10 years doing that job because the value of the work you are doing is unlikely to change, and as for supply and demand - a job that can be performed by anyone offers very little in terms of security.

People have the freedom to choose their way of earning a living in the USA and many other countries in the world, for the most part. Performance-based compensation is a good motivator for people whose contributions can have a meaningful effect on a company's bottom line, but it doesn't matter if Joe Bob screws on 10 doors per hour or 12 doors per hour at the Ford factory - there's still a low ceiling as to how much additional effort can improve a one-dimensional job. Even if Joe could work faster and slap on 14 more doors in his 8 hour shift, the entire assembly line would need to speed up for his contribution to have any effect on Ford's production rate.


RE: Good...
By Taft12 on 6/21/2011 11:54:57 AM , Rating: 1
quote:
I don't have a problem with people who want to work at a factory or some other blue collar job...


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.

You certainly think you're a lot better than these people. It sounds to me like you do have a problem with them.


RE: Good...
By EricMartello on 6/22/2011 2:31:48 AM , Rating: 2
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.


Most people are morons and I'd say your average blue collar peon qualifies as "moron". Now show me where I said I have a problem with them solely based on that fact?

quote:
You certainly think you're a lot better than these people. It sounds to me like you do have a problem with them.


I already explained what I have a problem with. Morons being overpaid for unskilled labor due to unions or government mandates...and for the morons taking advantage of that situation, I most certainly have a problem with them.


RE: Good...
By MrBlastman on 6/22/2011 10:21:26 AM , Rating: 2
It seems you know a lot about morons; what does that make you, genius?


RE: Good...
By EricMartello on 6/22/2011 10:43:47 PM , Rating: 2
I've got to wonder...are the people who fixate on my identification of morons rather than the entirety of the post feeling insecure about themselves???


RE: Good...
By 91TTZ on 6/20/2011 5:48:56 PM , Rating: 3
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.


It's supply/demand. Being a jizzmopper at a porn shop isn't a very intellectual job but I bet the pay is high because it's an undesirable job with relatively few people willing to do it. The job still needs to be done so supply/demand dictates the wage. I bet nobody wants to do that for $5 an hour, but for $20 an hour you probably have enough people willing to do it.


RE: Good...
By foolsgambit11 on 6/20/2011 9:55:35 PM , Rating: 2
quote:
in fact you actually need a sub-80 IQ to tolerate such tedious work.

If that's true, then only about 10% of the population can really do the work - meaning that supply and demand would indeed push up the wages for those jobs, just as much as they push up the wages for jobs that require an above-120 IQ. Boom! Logic bomb dropped on your head!


RE: Good...
By Zoomer on 6/21/2011 10:08:43 AM , Rating: 2
Not quite, other people can do the work too. It doesn't quite work the other way around though.


RE: Good...
By Raiders12 on 6/21/2011 12:29:34 PM , Rating: 2
Thank you! While we want everyone to afford the same luxuries as their neighbors, it's just not that easy. America is a diverse economy or different skills and different job types. People working assembly lines getting $20-30/hr and all the bells and whistles of benefits due to Unions is what killed this countries' industry. It didn't work before, and it won't work again. KNOW YOUR WORTH. If you work a GM assembly line putting in front seats all day, do you deserve to be paid what a mechanical engineer makes? No. Thats the way it crumbles. People will yell and scream that "you need to get off your high horse, you don't know what you're talking about!" Well the article just said avg factory wages here are $22/hr. GM average line worker's wages was somewhere near $33/hr when I looked it up last. I'm just starting out as an engineer, after busting my @$$ for 4 yrs in schooling, just in college, and am barely earning $20/hr. That is a job and skill this country NEEDS, science.


RE: Good...
By MrBlastman on 6/21/2011 12:43:20 PM , Rating: 2
I just thought I'd point out--historically speaking, the field of science was never sought after for accumulation of wealth. It was sought after for furthing the knowledge of mankind. If science ended up bringing an individual wealth, great; however, if not monetary wealth, if science brought knowledge that could change the world--that was worth far more.

You don't become a scientist to be super-wealthy. If you do, then you're in it for all the wrong reasons. Money clouds judgement. A true scientists mind needs to be pure to the method first and foremost.

With that said--you are absolutely right... America needs science more than ever before. It is bright minds and our historical lust for creation of new ideas and technology that helped make us great... along with our industrial and manufacturing prowess.


RE: Good...
By HrilL on 6/20/2011 3:51:48 PM , Rating: 2
Heh I have a skilled job and don't even make that much. I'm a network administrator...


RE: Good...
By cjohnson2136 on 6/20/2011 4:57:35 PM , Rating: 4
Im an Application Developer and I make about what these assembly line workers are making. I'm sorry but above 20/hour for a factory job now a days is too much with how we have machines doing a lot of it for us.


RE: Good...
By 91TTZ on 6/21/2011 10:25:18 AM , Rating: 2
The problem is that you, as an employee, do not get to decide what someone in your position is worth. It's supply/demand. The employer wants to pay employees the least amount possible. If they can easily find someone in your position that can do your job and is willing to work for less, they're going to go with that person.

In the case of factory workers, they make that much for a reason. There's probably not a lot of people that want to do menial work like that, so it raises the price a bit. Some tasks aren't able to be done by machines, so workers are needed. But most simple factory jobs have been replaced by machines, so the ones that are left require more skill than you might think.


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