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China Businesses The Almighty Buck

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."
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The End of Cheap Labor In China

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    • by jhoegl ( 638955 )
      Yeah... Its all theory.
      Ill believe it when I see it.
    • by mjwx ( 966435 ) on Sunday June 19, 2011 @08:51PM (#36494580)

      '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.

      • by Wyatt Earp ( 1029 ) on Sunday June 19, 2011 @09:28PM (#36494838)

        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.

        • by mjwx ( 966435 )

          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.

          That isn't particularly true,

          Plenty of mining companies such as Rio Tinto and BHP have set up in places like Tanzania. Granted for areas that are or were recently war torn this is true but that isn't that much of Africa. The problem is mainly infrastructure (ports and roads) but these can easily be built with enough investment.

          BTW, China is not investing in Egypt or South Africa because these nations are not third world, South Africa in particular has a well established manufacturing industry akin to

          • by wisty ( 1335733 )

            Keep in mind, we aren't talking about the cream of manufacturing. That's what China wants to keep. We are talking fabrics. China makes the tread and cloth, then sends it to Africa for poor women to sew into t-shirts. All you need is a sewing machine, and semi-reliable power.

            Once that starts, the infrastructure starts improving. Also, stable governments will get more support than smash-and-grab raiders, as there is actually something that's financially worth protecting.

            • by Hylandr ( 813770 )

              Target says to Wal Mart:

              "The Lord says he can get me out of this mess, but he's pretty sure, you're fooked"

              - Dan.

            • The problem with this equation is that Chinese people are still not for the most part affluent enough to be able to move into a consumer based society - they need to work just to keep a roof over their heads. If the Chinese government starts sending their jobs abroad, civil unrest will follow immediately afterwards.

              Also, what's to stop western companies just bypassing China and doing the same thing wherever China goes?

      • by erice ( 13380 )

        China will simply move the cheap manufacturing to Africa.

        No need. Cheap labor is still available in the interior of China. It is only the well developed coastal cities that are getting expensive (relatively).

        Africa isn't even next in line. That would be India along with Vietnam and Cambodia (although really only India counts. Vietnam and Cambodia are small countries whose cheap labor can be quickly exhausted)

      • by wvmarle ( 1070040 ) on Sunday June 19, 2011 @11:14PM (#36495586)

        China's interests in Africa are natural resource related. As other posters said already.

        Secondly, Africa has a simple reason that it does not develop well economically: no political stability. Say what you want about the Chinese government, at least it's a fairly stable, safe and thus predictable environment to work in, and that's all businesses need. You do not need your own private army to protect your business, like you do in many African countries. There are no people walking around the streets with an AK47 over the shoulder.

        Africa, as it stands, has no proper infrastructure, no stable government, corruption issues that are far worse than China's, and so on. It's just not an easy environment for businesses. And yes I know I'm generalising here, there are countries in Africa that have a working government.

        Incidently, this morning I just read about problems for textile factories. There is talk about a cut in the VAT rebate they can get from 15% to 11% on exports (they have to pay 16% VAT - so effectively their VAT goes up from 1% to 5%). A large number of factories has indicated they would probably close, as they lose competitiveness. Wages go up, the Yuan goes up, raw material prices are high. And that wages go up is not as much a result of improved productivity, it's more a result of labour shortages. There are currently huge labour shortages in China, especially the coastal regions. And that's what's driving up wages most.

        Furthermore they mentioned the next destination is probably not Africa, but, surprisingly, Europe. At this moment production costs in Romania are already lower than in China. Add to that the obvious advantages of sitting closer to your market, I wouldn't be surprised if very soon more European producers will set up shop there.

        Other Asian countries indeed seem more likely candidates, but with few exceptions infrastructure is a major issue. Indonesia for example only has a few short stretches of highway around their capital, making transport slow. They also don't have any main ports, and are limited to feeders and shipping via other ports such as Singapore. Vietnam is in slightly better shape, Bangladesh is a total mess.

        And about moving up the ladder: you're absolutely right. The government wants it, but it's going to take a long time. Other than heavily government supported industry (you mention airliners already, don't forget railways: the US is shopping in China for high-speed rail technology already) there is not much happening as yet. It is still Taiwan that's doing development, design and marketing, Hong Kong that's doing finance and logistics, and China that's doing manufacturing. Not much new coming out of China yet, they're still in the "copy" stage, and a lot of quality that comes out is poor at best. It's very much time they move on to the "copy-and-improve" stage but I haven't seen this really happening yet.

      • Re: (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 hea

    • No (Score:4, Interesting)

      by Chicken_Kickers ( 1062164 ) on Sunday June 19, 2011 @10:03PM (#36495096)

      Wishful thinking much? Western economists have been predicting the death of China since the mid 90's. Everything from over heating to under heating, from over population to declining population have been bandied out as the potential causes. There is also blaming China for oil price spikes when it was American speculators who was manipulating the markets. If I am an American, I would not be rejoicing at this news. It means that China is maturing and moving up the tech tree. China also has an advantage that the US doesn't: an autocratic oligarchy, the best form of capitalist governance.

      • by hitmark ( 640295 )

        You had me going until the last part. There may be some big names in Shanghai and Shenzhen, but You can bet that Beijing is keeping a close eye on their activities. Also, the infrastructure is still very much nationalized.

        Hell, China basically pulled a classic Keynes when their exports dropped. Rather then focus on austerity they fired up internal projects to keep the engines running. The oligarchs would just pack up and let the people fry under a similar condition.

  • by trout007 ( 975317 ) on Sunday June 19, 2011 @08:02PM (#36494230)

    It amazing to watch all of the people saying China is going to take over the world. It is like they have been asleep for the last 20 years. All centrally planned economies go broke including ours. China will be a basket case in the next 20 years.

    • China's not centrally planned. That's how they got rich. In some (by no means many) ways, the Chinese *economy* is more free than ours. The problem China will have will happen because people who are rich, and whose parents and grandparents were rich won't be so quick to swallow the party line as people whose parents or grandparents didn't have indoor plumbing.
      • Re: (Score:3, Informative)

        China is not centrally planned? There is no way you can be serious... check NDRC []
      • Huh? Huge parts of the Chinese economy are directly owned by the government. Sort of like how General Motors is owned by the US government. I suppose the Western media failed to inform the public of the recent unveiling of the Twelfth Five-Year Plan [], which will guide China's development for the next half decade.

        I really don't know how this idea got started, because it's not true at all. I see it so many places, though, so there must be some source of the contamination, like the Broad Street Pump [].

    • by mirix ( 1649853 )

      Not sure if you missed it, but Mao died a long time ago.

    • Its not just that which is making China powerful. China is playing both the capitalist game and the 'government controlled' game. You're free to open your own factory and employ chinese workers (which also means they get a look at your designs), while the government owns research facilities and that sort of thing.

      So when you look at how China got its train designs, and you wonder how the 'fake iPhones' look just like the real thing...

    • Re: (Score:3, Insightful)

      by fermion ( 181285 )
      The US is at 10% unemployment with more families living with fewer funds, resulting with many people who do not have minimum food or shelter. It is unclear if China has such a problem.

      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

      • by OctaviusIII ( 969957 ) on Monday June 20, 2011 @01:24AM (#36496652) Homepage

        The US is at 10% unemployment with more families living with fewer funds, resulting with many people who do not have minimum food or shelter. It is unclear if China has such a problem.

        Well, let's look at the economic stats, according to the CIA World Factbook []:

        - Unemployment is at 4.3%. Not bad, and certainly less than what we have.
        - GDP per capita (PPP) is $7,600. That is hardly the rich power we think of when we think "China". It's middle-income, with vast disparities in their society. While some live in fabulous apartments in Shanghai or Beijing, others live in third-world poverty in Urumqi or Lanzhou.

        I think it's clear that China has a problem with poverty generally. The US has a temporary unemployment problem; China has a structural wealth problem.

  • by jcr ( 53032 ) <> on Sunday June 19, 2011 @08:24PM (#36494368) Journal

    People move from subsistence farming to factory work, capital investment raises their marginal productivity, employers have to compete for workers, and wages rise. It's the same thing that happened in England and the United States in the late 1800s and early 1900s.


  • Not the U.S.! (Score:5, Insightful)

    by sootman ( 158191 ) on Sunday June 19, 2011 @08:26PM (#36494390) Homepage Journal

    "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 [] 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 [] 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: (Score:3, Interesting)

      by jcr ( 53032 )

      , I don't know where to buy decent clothes.

      Norsdstroms. You get what you pay for.


    • 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

      I have noticed that too. I had a washer that was over 20 years old (I bought it used, all I knew was they stopped making them 20 years earlier). Its replacement lasted less than 5 years.

      I believe that the US has seen big drops in real incomes, only hidden by low-cost imports form the US, but the real impact will hit when people real

      • by Kenja ( 541830 )
        If you only have 50$, you buy a 50$ microwave that only lasts a couple years. People cant afford high quality merchandise anymore. And the low cost items will still be made over seas so long as we have such stupidly low trade tariffs.
        • by dgatwood ( 11270 )

          And then, because 95% of people chose the $50 microwaves, the $150 microwave market becomes unsustainable at that price, so they become $500 microwaves, then $1,000 microwaves, and eventually disappear from the market entirely, leaving nothing but the junk available for purchase. And this is why the consumer electronics market is in large part a race to the bottom, both in price and in quality.

      • by dgatwood ( 11270 )

        My washer's lid switch broke after about five years, but all it takes is a couple of twist ties to fix that. If your washing machine actually broke in a major way (burned out motor, drum leak, etc.), then you just got really, really unlucky. Most non-electronic hardware (even stuff built today) has a lifespan measured in decades except for minor mechanical problems like sticking timers that need to be oiled, Nader switches that need to be solder-bridged, etc.

        • If your washing machine actually broke in a major way (burned out motor, drum leak, etc.), then you just got really, really unlucky

          The main gearbox (with plastic gears) broke such that it was not economically replaceable. Using Google, I determined that this was not an unusual problem for that model (a Maytag) at about 4-5 years old. So, no, the only time I was unlucky was when I chose that model.

  • I'm not so sure I believe this.

    When you consider the vastness of China and difference in economic conditions its hard to make general statements about "wages of manufacturing work" applicable to the country as a whole.

    With modern, and mostly new, cities which are as up to date (at least in their core areas) as anything in the US or Europe, you also must consider that a great deal of the rural country people are still sleeping with their animals, and don't show up in any wage survey.

    These rural people provid

    • Have you actually been there? (I just got back.) Shanghai is an interesting place, that's for sure. Wages for university educated and skilled people there are rising quickly. (You can't use unskilled farmers as programmers.) At the present rate of growth, they will match North American wages for equivalent work in about 4 to 5 years. Now I'm perfectly prepared to entertain arguments that the present rate of growth is unsustainable, so lay them on me... (And explain how they won't also depress wages here.)
      • Not necessarily unsustainable, but less and less people will benefit as they get richer.
      • It's not the rate of froth that is the problem. The problem is that is is centrally planned growth. That never works out because it always leads to mal investment. Remember a f years ago in the US people were saying house are a great investment. Yeah only when you are pumping trillions into an economy to pay for a war without raising taxes. And what happened? Almost all people were convinced the housing market was real. He'll even today you hear talking heads asking when housing is going to return. IT WAS A

  • Currency Issues? (Score:5, Interesting)

    by ect5150 ( 700619 ) on Sunday June 19, 2011 @08:32PM (#36494434) Journal

    Let's see China pull this off without constantly manipulating their currency to boost the manufacturing while keeping pollution half of what it is currently over those same 10 years. It's okay, because when inflation hits, the sh*t will hit the fan in China (look up the economic trilemma and see where China's weakness is... for the USA, we choose not to peg our currency to fix our trade gap).

    • And what would the economy of the USA look like without manipulating our own currency by means of quantitative easing and record low interest rates?

      We're both currency manipulators
      • by poity ( 465672 )

        I think the idea here is that there's no free lunch in distorting the economy, artificially strengthening one part will always make some other part of the system more vulnerable -- the invisible hand always catches up with you and makes you pay. To say things akin to "well the USA does it too" avoids the issue, I mean what conversational response can there be to that rhetoric, "ok we'll stop talking about it"? Give me a break.

      • And what would the economy of the USA look like without manipulating our own currency by means of quantitative easing and record low interest rates?

        Much better than the rest of the world had they not done so. QE was done to help China/Europe, not America...

        It should never have been done, that I agree with. But the world would be in a bad way without it. As we will see since it only delayed the inevitable.

    • Don't be too sure. The Wall Street Journal, which in the past has been highly critical of Bush's currency policies (Bush was trying to devalue the dollar, and succeeded), has just posted an editorial calling for inflation []. The worst part is they have some reasonable arguments to back it up (americans are deeply in debt, a high inflation rate would help most of us). Don't expect the economy to recover easily if we do that's going to be bad no matter how we get out of debt.

      The point is, the
  • by goodmanj ( 234846 ) on Sunday June 19, 2011 @08:35PM (#36494464)

    People who oppose globalization should really think about this. In a couple of decades, the globalized economy has elevated a nation of a billion people from the bottom rung of world socioeconomic status to the solid middle ground. No question, the elevation of China has had some negative impacts on the economy of the developed world, but not so bad, really: the US economy has not collapsed during the process, and its manufacturing industry has been weakened but survives. No question, the process has had some negative impacts on Chinese workers, but nothing compared to the servitude, abuse, and death of the West's own industrial revolution. And finally, no question that political freedoms in China have not changed with the economic times, but I consider the *ability* to communicate a prerequisite to the *freedom* to speak, and the Chinese government may soon realize it has a tiger by the tail in that regard.

    And consider on the other hand, the positives. A billion people are now able to live in comfortable housing, free of disease and pestilence, able to travel across the continent and participate in global dialogue. A good chunk of these billion people are now in a position to buy US-made products like World of Warcraft, Ford Explorers, and a million things made in China, but designed in the US by 3M, IBM, and Microsoft.

    A rising tide may not lift all boats, and it surely doesn't lift all boats equally, but still, a billion boats is a damned good start.

    • Sure globalization is great if you ignore the niggling minor problems like pollution and exploitation of desperate workers. Also you would have to arbitrarily decide that dying from chronic diseases from living older is better than dying younger from acute diseases. And of course since there is no objective way to measure quality of life we'll just assume that people with the most stuff are the happiest. It validates the American lifestyle so Americans, at least, have to approve to avoid cognitive disson

    • 1. China is a centrally-planned economy with highly manipulated currency.
      2. The US economy stayed solid between 2001 and 2008 because of federal deficit spending not the work of the US private sector.
      3. The private debt in the US jumped dramatically in the last decade or so to compensate for stagnating and declining wages.
      4. China is substantially more repressive than the West was during its period of rapid industrialization. Extrajudicial punishment and execution are far more common in modern China than th

  • China seems on good way to actually equalize the incomes a little bit. Creating a working internal Martken is good for them and good for the world.

  • by Americium ( 1343605 ) on Sunday June 19, 2011 @08:41PM (#36494510)

    With technological advances I would hope Chinese workers see some of the benefits from high tech production facilities combined with new infrastructure.

    The US has a minimum wage well over $5/hr and for long hours manual labor it's about $10/hr for minimal skill work. In China it's now approaching what? $1/hr? Wow, a whole 14% increase in that per year? So in 15-20yrs their wages will compete with ours. I'm sure the petroleum costs just to ship products here has been a bigger burden to manufacturing companies.

    People say they are taking over, yet I still haven't seen anything new from China, it's all designed in the US and Europe. Until we start importing high speed trains, I see China just as a jewel of cheap labor. Let's hope at some point they are developing high tech products for us and cheap manufacturing leaves, but I think it's going to be another 20 years before that happens.

    • by smash ( 1351 )

      Be that as it may, the money is moving to china. The clever people will go earn money where the money is. The US has been living on borrowed money and time for far too long and eventually people will lose confidence in the dollar (its already happening, our exchange rate in AU has gone from $0.70au:$1usd to $1.1au:1usd fairly rapidly) and stop extending any more credit.

      Once that happens, the US will need to work to repay its debts without any more spending.

      • The clever people would much rather stay in the US, but we kick them out every year due to VISA restrictions.

        We have what, $100,000 of debt per working adult? at less than 1% interest. Let's start with $2,000 a year payment, that'll do it in less than 100 years at 1%. Or we could just not pay anyone back, that works too, just default on it all. Or add 2% inflation, keep interest at 1%, and our debt decreases every year with no payment. So worst case scenario is a 2% tax hike, I could live with that.


        • by smash ( 1351 )
          You have around that level of debt, but it is increasing at a fairly rapid rate. It is not shrinking.
    • Wow, a whole $5 per hour! What an incredibly rich country. Here in .au it is about $15/hour. And I thought the US abolished slavery years ago!

      • I have to say it, OMG! I'm moving to Australia, that's $30,000/yr for 40hr work week, minimum wage. That's unbelievable, I just deleted my rant about not being able to legislate wage increases, apparently you have done exactly that, amazing.


      • And it's cheaper to pay someone to work than to have a slave. You don't have to pay for housing, oversight, healthcare... and if you pay someone, they work harder.

      • It varies from State to State. In WA State, we're pushing $9 per hour minimum wage, plus mandatory social security (another 7.62%), workman's compensation insurance, unemployment insurance, etc. There isn't a single State that I know of that has a minimum wage at the Federal level.
  • "In what is supposed to be a land of unlimited cheap labor". Everything has a limit. The thing with China is that most of the manufacturing is happening at the coasts. People migrate in droves but this drives up the cost of living. Wages rise and eventually will be come marginally competitive. Similarly moving things to Cambodia, Vietnam etc. Eventually the flood of money will cause prices to raise negating some but perhaps not all the benefit of outsourcing there.

    You can look at it at a company level too

  • Yea... I can see Vietnam absorbing China's manufacturing.

    Let's see...
    87,279,754 Vietnamese.
    1,331,460,000 Chinese (in 2009).

    There may be a SLIGHT difficulty here.
    Same for eastern european countries.

    Now.. Africa has 1 billion people... so far so good.
    But it's 54 countries with 54 legal systems.

    The rule of law doesn't really hold in many of those countries.

    I'd say China will draw jobs from the US for another 4-6 years. Then the bigger threat is automation and robotics. Already businesses are buying hundred

    • by smash ( 1351 )
      Don't count russia out. Moscow is currently the most expensive city in the world to live, and Russia has a decent number of people. The chinese can sell to the russians just fine.
  • ... is that the chinese have all the credit, the USA has all the debt, and they farm out work to the USA's totally fucked up jobless economy for cheap(er than they earn).

    This is where the USA repays its debt (from living on and inflating markets with borrowed money) to the world, Good luck guys, its not going to be pretty.

  • My guess is quality will go up as manufacturing leaves China, where it is encouraged to do ANYTHING for a buck and isn't unethical to take/gives bribes.

  • Your government putting a crazy-bigass-TAX on companies who take jobs outside the country would.
    FYI: they rest of the world is watching you and wondering WTF is happening over there. And this is one of the reasons among many....

  • Chinese wages are increasing 12% per year, while real wages in the US are decreasing every year. Soon it won't matter whether or not China buys us out, because we won't be able to afford their products anyways.
  • Like water (Score:3, Interesting)

    by macraig ( 621737 ) <> on Sunday June 19, 2011 @09:57PM (#36495046)

    Outsourcing is like water: it flows downhill, and the landscape changes. China isn't the base of the hill any more.

    This is why outsourcing is not a bad thing. It's the global economy attempting to equalize itself. Don't ban it, don't fight it, embrace it.

    • I'd be more inclined to embrace outsourcing with partners that had equal tariff and currency playing fields. China puts up high tariff walls to protect its industries. The US is basically at zero tariffs. That makes competition nearly impossible right there.

      I'd also like to see a little morality/responsibility (dealing with externalities and employee treatment) mixed into trade agreements from time to time. You know, if Chinese industry X has zero pollution regulations, but the US industry X has certain

  • I've been predicting for some time that manufacturing will begin shifting to southeast Asia. There are issues, however, with relocating facilities there. Lack of good infrastructure is one problem. But things of that nature can be addressed with time. Political corruption, general lack of organization and instability are problems that will be far more difficult to overcome. China has many problems, but it's a far more stable environment in which to do business and manufacturing.

    Labor costs, however, aren't

  • by LynnwoodRooster ( 966895 ) on Sunday June 19, 2011 @10:38PM (#36495338) Journal
    Most manufacturing in China has labor costs accounting for 2-5% of the product. The big "cost" increase is the rising strength of the RMB. Four years ago it was 8 RMB = $1 USD. Now it's 6.47 and falling. That's where the cost of Chinese production is coming from.

    Move to Cambodia, or Vietnam, or Thailand or Laos and their economies will also grow and you'll see their currency appreciate in value as well, leading to the same issue. In the mean time you'll need to live with greatly reduced infrastructure and shipping capacity as compared to China.

    And yes, I do a lot of work in Asia, and live half my life in Shanghai supporting manufacturing in China, Thailand, and Vietnam.

  • by roman_mir ( 125474 ) on Monday June 20, 2011 @01:59AM (#36496868) Homepage Journal

    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: (Score:3, Insightful)

      by hitmark ( 640295 )

      Put Fountainhead down and step away, thank you.

FORTUNE'S FUN FACTS TO KNOW AND TELL: A giant panda bear is really a member of the racoon family.