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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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really guys
By spoerad1 on 6/21/2011 12:24:16 AM , Rating: 1
so from what i have read all you people who see unions as some how our biggest problem want everyone else in the US to get an education and a highly paid corporate job. Wow great idea guys somebody call Obama and tell him. Of course the second your employer decides your not worth shit because they can hire someone in India to do twice as much work for half as much then what.

You do realize that as these countries develop they will start to take more white collar jobs and less blue collar jobs and then the roles will be reversed. In fact i would say most corporate jobs are far less useful to society and probably deserve to be payed less than factory workers.




RE: really guys
By superstition on 6/21/2011 12:33:59 AM , Rating: 2
But who will go to the golf courses and buy the yachts?

Think of the yacht makers!


RE: really guys
By MrBlastman on 6/21/2011 12:36:18 PM , Rating: 2
Ah and this is the problem some of these "industrial labor line bashers" don't quite understand. A strength of a country is not determined by how many lawyers they have (as lawyers produce nothing at all, they just transfer wealth), how many managers, salespeople or other white-collar jobs they have, but instead a function of what a country can produce and how much it is worth on the global market (or to its own citizens).

The concerning thing with America is how we have offloaded all of our manufacturing and industry to corners of the world such as China--we are left with purely a consumption and service based economy. An economy that completely depends on goods being manufactured overseas so we can sell them here and abroad.

This is precisely a huge reason why unemployment is so high right now in our states and why our Dollar is becoming worth less and less. Our production potential has declined dramatically here. Once people realize that pissing money down the drain constantly on services or shipping it overseas out of our banks--no, I don't think it will matter, as the damage has already been done.

It irritates me to great lengths to see people bash labor as being for "stupid people" or "idiots" or "lazy slouches that can't get a real job." The fact of the matter is, though, that these people might be in boring, line jobs--the employment of people in the _service_ sector completely depends on other people being able to consume their services! You can't have something by producing nothing.

We need to bring back industry and manufacturing to our Country more than ever before. Sure, the natural progression of society is to go from agrarian to industrial to service--but, as history has shown, a completely severance of industrial ties only sets up an economy... and eventually a world power, for total collapse. Our industry is what always set America apart--gave us our strength. Take it away and we're only as good as people want our service.

You have to produce a real good to have real value and I think the world is now beginning to see this. I don't like unions at all, I believe completely in the free market system--but, I realize that our labor jobs have a definite place and they are no means below the rest of us. They are an important component of a properly functional national machine.


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