The End of Cheap Labor In China 422
hackingbear writes "In the past decade, real wages for manufacturing workers in China have grown nearly 12% per year. The hourly cost advantage, while still significant [comparing to the West], is shrinking rapidly. The changing economics of Made in China will benefit both the rich and poor world. Countries like Cambodia, Laos, India and Vietnam are picking up some of the cheapest labor manufacturing left by the Chinese. And there is already evidence of at least the beginning of a shift in manufacturing operations returning to the US. Perhaps we will soon stop picking at 'Made in China' but instead complaining 'Made in Vietnam/Cambodia,' while serving the flood of Chinese tourists stocking up on brand-name merchandises on US tours and Chinese students paying high tuitions to our cash-strapped universities."
Not the U.S.! (Score:5, Insightful)
"The changing economics of Made in China will benefit both the rich and poor world."
It won't help the U.S! We keep demanding cheap goods, no matter how poorly made they are, and the only way to get that is to take advantage of poorer countries and manufacture overseas. Of course, that means there are no manufacturing jobs anywhere in the country, so in another few years, the only place in the U.S. where anyone will be able to shop or work will be Walmart.
On the one hand, you have the iPhone--built in China and it's an absolute miracle of modern technology. Have you SEEN one of those things on the inside? Rows and rows of tiny little dots on a board and I can't even guess what any of it does. I'm sure, given U.S. labor costs, it would cost a lot more than it currently does.
On the other hand, I don't know where to buy decent clothes. I bought a 12-pack of socks a couple weeks ago and three of them were mis-sewn. Every time my wife buys a 3-pack of underwear for the kid, she takes them out of the package, washes them, and 1 or 2 will come out of the washer--their first wash, having never been worn--with the waistline frayed.
I'm not saying that everything that is (or was) made in America is automatically great, but wouldn't it be great if people DID give a shit about the quality of what they made, and that the money would stay within our borders? But I think the opportunity to do good has passed. I saw Schmatta [latimes.com] a few months ago and that, too, is depressing as hell. It's the story of New York's fabled garment district and it ends with some fun stats: 40 years ago, 95% of clothing sold in America was made here. Today, 5% is.
The only thing America has now is an entertainment industry and bullshit I.P. laws. Oh yeah, and prisons and wars. And a bailed-out, fucked-up auto industry that somehow managed to learn almost NOTHING after they started loosing their asses in the 80s. (They started to regain their composure a bit in the 90s but then they just started making SUVs.)
Maybe I've seen Jerry McGuire too many times but I really would be happy owning fewer things that held together better and I would be more than happy to pay more for that. My parents bought a microwave within a few years of when they first became common (early/mid-80s) and it has been replaced exactly once, and that replacement is still in use. Sure, new ones cost less than $100 at Walmart now, but I've bought 3 or 4 since buying my house in the late 90s. I don't care if it costs less overall to live like this--money isn't everything. The Great Pacific Garbage Patch [wikipedia.org] should make anyone stop and think "hmm, maybe rampant consumerism isn't the way to go."
PS: we also, as a country, need to stop looking down on blue-collar work. Not everyone needs a college degree. We really need to have trade schools at the high school and college levels.
Re:About. Fucking. Time. (Score:5, Insightful)
'nuff said.
China will simply move the cheap manufacturing to Africa.
You don't think china's been buddying up with East African nations for nothing do you? They've had a military medial ship there for six months late last year spreading China's good will.
China is not dumb, not in the slightest, they've been preparing for the growth of their economy for at least a decade and manufacturing will not start to move for at least another decade, China intends to branch into the more advanced side of manufacturing such as aircraft and high tech. Much the same as Japan and Taiwan did, when I was a lad, "made in Taiwan" was not a symbol of quality, now days Taiwan makes some of the highest quality electronics in Asia (along with Korea and Japan) so why can't China do the same thing? Unlike the other poor Asian nations such as Thailand or the Philipines, China does not have a incompetent leadership mired in corruption.
So chances are, in 15 years we'll still be buying Huawei modems, except they will have "made in Tanzania" written on the side.
Re:That's just the beginning of the cycle, John. (Score:4, Insightful)
A once-proud nation with a free and well-functioning economy is reduced to a pathetic mess, with a small number of very wealthy individuals and a huge masses of the poor.
I was having trouble deciding whether to mod jcr up or reply to this braindeadedness.
Huge masses of poor? In the US? The only way you can come to that conclusion is if you don't even know what poor is. I don't need to show you, but this [google.com] is poverty. In America, homeless people are fat, and the only reason they are homeless is because they have serious mental or emotional issues.
In America, we have 'poor' people, as measured by the poverty line, but the poor people have refrigerators. They frequently have cars. They definitely have shoes. I'm not saying that everything is perfect here, or that there aren't people who have money problems (the primary problem people will run into in that case is healthcare), but in America, we have it good. If you don't think so, you really need to get out of the country and see the world.
Re:Central planning doesn't work. (Score:3, Insightful)
If you think there's no difference between a regulated market and central planning, I invite you live in a Chinese ghost city [dailymail.co.uk] for a little while.
Re:About. Fucking. Time. (Score:5, Insightful)
Once you get out of South Africa and Egypt there is no infrastructure for manufacturing in Africa. Even with 15-25 years of solid investment and construction, there won't be infrastructure for manufacturing in Africa outside of Egypt and South Africa.
China isn't investing in the Republic of South Africa or Egypt, they are investing in places they can strip bare of mineral wealth.
Re:Central planning doesn't work. (Score:3, Insightful)
This economic cycle we see happens independent of the economy. The U.S. was a manufacturing joke in the 18th century, by the 20th century was the world leader, and now is in decline. The cause of this is that as a country enters it's manufacturing phase, labor is reletively unskilled and has few ex[ectations. Management is inefficient, and techniques not well understood. As time goes on labor becomes more skilled, management becomes less of impediment to efficiency, and local techniques are adapted from global techiques. Further, as there is no legacy constraints, products can be innovated to meet current needs instead of legacy needs.
This is the method by which countries have achieved higher standard of living for the past few hundred years. We may or may not see this expand to Africa and Indian sub continent. Manufacturing requires a local relatively sophisticated educational systemin which students are modeled into shape. Sustained manufacturing requires a highly educated creative group that can innovate process and products. India has education, but does may not equally educate everyone. Much of Africa is too flush with oil money to care.
Re:About. Fucking. Time. (Score:3, Insightful)
It was less about cost of wages and more about investments... Multinationals want to parlay their Western profits into East Asia... the fact that the get to stick it to the "lazy union workers" is secondary to the wall street guys.
They have spent 30 years siphoning off the profits from "unions" to brand new shiny factories filled with college grads.. While demanding western workers work at 30year old factories with little capital improvements in the last 20 years... And take a pay cut too. I constantly hear from co-workers from India, China, Brazil how great the company is in their country... Some of the things they brag about were TAKEN AWAY 20 years ago, or even things American companies would NEVER do for "factory workers".
Of course the average life expectancy in these countries is just about 65, they are floating about 5-10% on retirement... Not like the western countries where there are more people on social security than in K-12 school now. In the 1980's and 90's the US let companies "eat their seeds" no amount of "paying cash" will compensate for the compound interest lost, with fewer employees to pay in due to outsourcing, the weight is crushing.
Living in the Midwest this is exactly what the "business government" is trying to do... Many states have budget problems but those don't really effect education and such because those used to be separate "hats". These are the same "successful" businessmen that outsourced for 20+ years now trying to raid the "mattrress money" and blame it on the employees. I think the current leaders in Govt think RoboCop was a manual not a satire of bad capitalism.
Fooling yourself again, ha? (Score:3, Insightful)
The main reason to move labor out of US and the other Western countries is not wages. It's not wages.
Wages are just a cherry on top of the proverbial cake. The main reason to move production and capital out of the West is because production and capitalism are punished in the West by the forces that are fighting free market capitalism with every breath they take.
Government intervention: income/payroll/capital taxes and business regulations are the main culprits, not wages.
Wages are only a matter of the market demand/supply ratio, and if the jobs were just moving towards the lower wage locations, then this would immediately precipitate to workers increasing the supply and wages would automatically lower, and the smaller amount of dollars in the hands of workers in local areas would push prices for housing down, as well as other prices for products/services in that area.
The prices must come down when there is an oversupply and lack of demand, this applies to labor just as well as to any good/service.
So wages are a tiny, really the least significant reason for moving production capacity out of US and the West. The main reason for this capital flight is the atmosphere that is created by the political system, which caters to the majority of the population - workers, and does this to the detriment of the minority - employers, but in the mobile world, the capital also become mobile, so punishing the employers in this case only causes them to be mobile and to move.
There are basically no private unions left. The reason for it is simple: unions eventually destroy the business. They drive wages up, but worse than that: they cause the business to have too many obligations, liabilities, that make the business uncompetitive. The above-average benefits, the above-average pensions, medical plans, etc. etc. (not vacation time, it's a misconception that vacation time is significant, as it is not the employer who pays for vacation time, it's the employee, who takes less cash home in exchange for more vacation.)
The unions act as a small version of a government, so now they are only left in government, where they are slowly and surely driving the entire government system out of business. In government there should be no unions in the first place, as the unions in government are negotiating with politicians for their benefits, not with employers - tax payers.
Of-course unions are only a small part of the problem, the main problem is the mob mentality, that the politicians are catering to, as they pass more and more legislation, more and more business related laws, which drive competition out of the system, create monopolies/oligopolies, push prices up, decrease quality, inflate the money supply to support the ever-increasing appetites of the monopolies/oligopolies and the mob to the 'free lunch'. So when you destroy the opportunities to do business, destroy ability to compete, destroy ability to save (inflation), destroy ability even to enjoy your business (all the regulations turn a businessman into part of government bureaucratic machine, soulless, joyless), you cause capital flight.
Capital flight is the reason that jobs disappear of-course. Capital is not printed cash, capital is ability to produce. Capital is ability to exchange with others for tools/materials/products they produce so that you can produce as well.
The government has destroyed ability of people to tend after themselves, to make their own living by producing, and instead it pushed people to become mindless consumers living on credit. Realize, that credit should not exist to provide people with ability to buy consumables.
The reason to have credit is to provide businesses with opportunity to invest into more production capacity, not to provide consumers with more money to spend on finished consumer goods. The reason for it must be obvious: credit must be paid back with interest.
Buying consumer goods does not generate interest and certainly it does not provide one with opportunity to p
Re:Central planning doesn't work. (Score:5, Insightful)
This seems to be a popular argument on Slashdot lately. Taxation is theft, and yet prosperity is only possible because the government allows individuals to accumulate wealth. In other words you want the government to protect your liberties and your property, you just don't want to pay them for it.
Think about the biggest advancements of the 20th century. Most of them were government lead. The national electric grid, improved transport links, military hardware advances, space exploration etc. When it comes to big, expensive and/or risky projects the government does what private enterprise cannot.
It is interesting that you should paint centrally planned economies as being run by Luddites. China is doing the exact opposite, pushing ahead with high tech projects and automation. China is not dumb, just look at how it manages America through Chinese banks lending them money.
Re:Fooling yourself again, ha? (Score:3, Insightful)
Put Fountainhead down and step away, thank you.
Re:That's just the beginning of the cycle, John. (Score:5, Insightful)
Actually, many in the US are homeless not because of mental health issues, but because of the justice system, and then leads to mental health issues.
Go to jail, do not ever find a real job again unless you are staggeringly unlucky. What else have you got other than going back to jail or living on the street?
I used to work with an organization that trained homeless in useful work skills and tried to find them jobs and get them on their feet. Overwhelmingly these were men, overwhelmingly they had followed a trajectory similar to "had a good job, went to jail (almost always for drug offenses, and almost always for ridiculously small quantities), got out and nobody would hire them because of their record"
Not to say that your larger point is not dead on - we have SOME poor people in this country, but the vast majority considered poor by our standards are quite well off compared to real poverty.