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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 Murst on 6/20/2011 12:34:07 PM , Rating: 3
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.

I do have family who work in a factory, and there's no way I could have done that while going to college. They work a lot of hours (good luck trying to find a factory job that expects you to come in for 2 hours a day).

Also, although the work is unskilled, it does take a lot of effort to actually perform. Its not something that most people could do while doing another thing such as obtaining a college degree.

RE: Good...
By quiksilvr on 6/20/2011 4:00:02 PM , Rating: 2
If you only have to pay them ~$8 an hour, I guarantee you they will take you even if it was just one hour a day.

RE: Good...
By Bad-Karma on 6/21/2011 3:49:34 AM , Rating: 1
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.

I have to agree with you, Engineering can be some of the most challenging and time consuming courses out there.

But it's a person's level of commitment and focus toward getting the degree. I managed to tough it out and acquired a BS in CS (minored in materials Eng) and then my Masters switched over to CE, all while being constantly deployed and stationed all over the globe (active Duty USAF since 95). Much of it was spent on the battlefield.

It took me a year or so longer to complete each degree thanks to all the hastily dropped classes but thankfully most could be can be continued through correspondence. I did what I had to do. Which usually meant long hours, little sleep, and limited social life, but I got it done. It has put me and my family in a much more comfortable lifestyle now and we are getting to reap some of the reward for toughing out those early years.

I've had friends and acquaintances who do nothing but sit and play video games in their spare time. I hate it when they show me their stats page for XYZ game and I see that they have so much time played that they could of easily obtained one or two degrees in the same time period. Some of these people are incredibly smart but they get left behind simply because they continually fail to invest in they're own future.

When I hear someone bitch and moan about having to work long hours, menial jobs, low wages, etc.. I usually stop and ask them about how much effort they've put into their education and job skill development. They seldom answer that they couldn't get the money for tuition, it's usually "I just don't have the time."

The ant & the grasshopper fable always comes to mind.

RE: Good...
By Motoman on 6/21/2011 3:40:05 PM , Rating: 2
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.

It's called working part time. I was a motorcycle mechanic while going to college - and a good one too. Skilled labor...not some moron on a production line assembling part A to part B with a pretorqued air wrench. My employer worked with me to set up hours that worked with my school schedule, and I worked as much as I could handle.

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke

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