manufacturer:
If you read into the article a little deeper the writer points out that safety equipment is made available and is mandatory for the workers, however, they were allowed to remove them while he was taking pictures.
Mike H.
I disagree. If anything kills manufacturing in the US, it will be union workers pricing themselves out of the market. Locally, we had a very established business where the rank and file struck for higher wages, despite knowing the employer was already fighting off a diminshing market and offshore competition. You already know the results- the business folded and the tooling went to- China.
Just last week, a large factory announced that it was closing- idling
1200 workers. The jobs are going not to China, but to Singapore. It's hard to feel sorry for these workers- they were getting big bucks and bennies for assembly line work and they wouldn't consider even a small pay cut to stay employed.GM is setting up car factories in China. GM says they are building for the Chinese market only, but I wonder...
-Carl
Excellent post. I work for a company that produces heavy stamping dies (60 ton max, roughly). You should hear the stories...
"His wife and children were brought in to say goodbye. Then they opened the die."
Regards,
Robin
With a good Chinese worker making $0.80/hr., and with productivity in their better export-oriented plants and shops running perhaps 2/3 of ours, there was no other possible outcome, Carl. The business would have chiseled them down as far as they could, pocketed whatever they could, and then gone to China anyway in a few years. That's happened in several industries over the last 5-10 years. The forces that would make it necessary to go to China because you're paying $20/hr. wages are the same forces that would make it necessary if you were paying $10/hr. wages.
You have to ask yourself why this is happening. If NAFTA and China trade are supposed to leave the high-end jobs in the US (they're even supposed to
*increase* the number of high-end manufacturing jobs in the US, according to their supporters), why have average manufacturing wages, adjusted for inflation, declined by 7.6% in the US over the last 25 years or so? There's a pattern, and there are numbers, and they fly right in the face of the free-trade doctrine.How much would the next "small pay cut" be? Where is this headed? China and Singapore are improving their productivity at a scorching rate. We ship entire factories over there now, along with managers and trainers, and they often wind up duplicating the productivity of the former US operations, or nearly so, in less than a year. So, how far down are you willing to let wages go to compete with them? Maybe $2.50/hr?
There's no need to wonder. Shanghai-GM's CEO said explicitly a few months ago that they plan to be competing on the world market (read, "exporting cars to the US") within five years. Right now it costs more to build a complete car in China than in the US or even in Japan. But not for much longer.
Go down to your Chevy dealer in a couple of months and take a look at the engine in the new Equinox SUV. It's made in China, complete. They're starting to ship them to Canada this month, to be installed in the SUV's and shipped to the US.
Are you ready for that? Do you have any experience as a hospital orderly? It looks like a good job for the coming years.
Ah, but it's more than the 'low end' jobs that are begin outsourced.
Great article in the NY Times last week that says there's a bunch of investment houses that are beginning to open branches in India and hiring analysts from those counties. Of course right now they say 'we're only sending the scut work overseas' but I think this is the same thing that GM was doing when they said 'we're opening that engine factory so we can sell the cars in, um, China.'
If I were running a software company or an investment house, and I could hire software engineers or MBAs and PhDs at half the cost to run my operations, I'd be stupid not to take advantage of that.
It's interesting to hear all the handwaving and backpedaling when the company speakers explain why they're not just moving most of their operations overseas.
Jim
================================================== please reply to: JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com ==================================================
Yea-but Ibet you it told you don"t eat em Ray Mueller
Mm.. same thing happens with people that get trapped and twisted between a subway train and the platform. Their mangled and twisted body stays alive until it's time to get the trains running again and they have to jack the train back...
Yes, some Chinese production facilities are very well equipped- with huge volumes they can afford to use imported machinery from Japan, Taiwan, Europe and the US, both for productivity and to meet quality standards. A cash-starved Western enterprise making a fraction of the number of units might be forced into using worse (maybe imported HF) machinery. I visited a Chinese factory not long ago with a captive mold shop and asked them why they used Hitachi EDMs rather than the domestic product that was half the price. Quality and productivity- buying the best in the world made sense to them, despite what seems like rock-bottom pricing to their customers. Compared to a similar US enterprise, they have very cheap wages, more flexible if not less regulation, higher taxes, similar energy costs, possibly higher land costs. Raising capital is probably much easier in the US.
It's interesting that "free(er) trade" seems to directly benefit none of the workers in the developed countries (when two developed countries such as Canada and the US do it, workers (but not companies and investors) both lose), when one country is developed and the other isn't the undeveloped country gains low wage jobs.. and pollution and energy consumption and requirements for infrastructure). And the developed country gains profits for corporations.
Current projections for 2040 are that China will have the world's largest economy (it's only recently surpassed that of Canada, one of the smallest G7 members, but still the US largest trading partner). Followed by the US economy and (closely) by India. Of course projecting that far out in advance is sure to be way off, but it indicates the trends. Americans will still be richer than Chinese, but by maybe 2:1 rather than 30:1 or more. Obviously, if that more economically egalitarian world, if it comes to pass, will be quite different from today's. The same projections showed Russia to be relatively insignificant economically.
And, for the paranoid, militarily, an ascendant China will not acquiesce to having another nation able to rain death down upon them from space without possibility of retribution. They are definitely looking 50 years+ into the future. As the march towards a US missile shield and the militarization of space seem inevitable, we can expect that they will do at least the minimum required to maintain a credible deterrent. For the moment, not much is required of them, some modifications to the reentry vehicles of ICBMs, but longer term, denial of the use of space for potential foes, and space-based weapons are probably a necessary security issue for them. Of course the current lurch towards unilateralism, PNAC and the rest serves to crystalize the matter.
Which (along with national pride) is probably part of the reason behind their ambitious space program, probably resulting in them being only the third nation to launch a human being into space, by the end of next week. They have announced plans to send a man to the moon, and eventually to Mars. Although the technology they are using now is old-ish (Apollo era/ Soyuz for the spacecraft), this is non-trivial. I wonder what the effect would be on the West of seeing a Chinese astronaut plant that red flag with yellow stars on the surface of our one moon, let alone Mars. If the initial flight is successful I do plan to toast their accomplishment, but we have to think about this tit-for-tat stuff in the military area. Eventually it will all come home to roost, and announcing plans for absolute military dominance over a potential foe as a long- term objective shows some real lack of understanding of human nature.
Best regards, Spehro Pefhany
Mm.. same thing happens with people that get trapped and twisted between a subway train and the platform. Their mangled and twisted body stays alive until it's time to get the trains running again and they have to jack the train back...
Yes, some Chinese production facilities are very well equipped- with huge volumes they can afford to use imported machinery from Japan, Taiwan, Europe and the US, both for productivity and to meet quality standards. A cash-starved Western enterprise making a fraction of the number of units might be forced into using worse (maybe imported HF) machinery. I visited a Chinese factory not long ago with a captive mold shop and asked them why they used Hitachi EDMs rather than the domestic product that was half the price. Quality and productivity- buying the best in the world made sense to them, despite what seems like rock-bottom pricing to their customers. Compared to a similar US enterprise, they have very cheap wages, more flexible if not less regulation, higher taxes, similar energy costs, possibly higher land costs. Raising capital is probably much easier in the US.
It's interesting that "free(er) trade" seems to directly benefit none of the workers in the developed countries (when two developed countries such as Canada and the US do it, workers (but not companies and investors) both lose), when one country is developed and the other isn't the undeveloped country gains low wage jobs.. and pollution and energy consumption and requirements for infrastructure). And the developed country gains profits for corporations.
Current projections for 2040 are that China will have the world's largest economy (it's only recently surpassed that of Canada, one of the smallest G7 members, but still the US largest trading partner). Followed by the US economy and (closely) by India. Of course projecting that far out in advance is sure to be way off, but it indicates the trends. Americans will still be richer than Chinese, but by maybe 2:1 rather than 30:1 or more. Obviously, if that more economically egalitarian world, if it comes to pass, will be quite different from today's. The same projections showed Russia to be relatively insignificant economically.
And, for the paranoid, militarily, an ascendant China will not acquiesce to having another nation able to rain death down upon them from space without possibility of retribution. They are definitely looking 50 years+ into the future. As the march towards a US missile shield and the militarization of space seem inevitable, we can expect that they will do at least the minimum required to maintain a credible deterrent. For the moment, not much is required of them, some modifications to the reentry vehicles of ICBMs, but longer term, denial of the use of space for potential foes, and space-based weapons are probably a necessary security issue for them. Of course the current lurch towards unilateralism, PNAC and the rest serves to crystalize the matter.
Which (along with national pride) is probably part of the reason behind their ambitious space program, probably resulting in them being only the third nation to launch a human being into space, by the end of next week. They have announced plans to send a man to the moon, and eventually to Mars. Although the technology they are using now is old-ish (Apollo era/ Soyuz for the spacecraft), this is non-trivial. I wonder what the effect would be on the West of seeing a Chinese astronaut plant that red flag with yellow stars on the surface of our one moon, let alone Mars. If the initial flight is successful I do plan to toast their accomplishment, but we have to think about this tit-for-tat stuff in the military area. Eventually it will all come home to roost, and announcing plans for absolute military dominance over a potential foe as a long- term objective shows some real lack of understanding of human nature.
Best regards, Spehro Pefhany
Not so. The business in question made railroad oil lamps and their number one customer _was_ China. Oops.
Wages have declined because they were too high! Ed, I worked in an all-union car parts factory for 18 months. The waste of time and talent was incredible- a janitor makes as much as a skilled machinist, despite the fact the janitor contributes absolutely f*cking nothing to the output of the factory. Only a $50 dollar an hour electrician can screw in a light bulb- if anyone else does, the union will file a grievance, may stop work in the plant for a day. I saw guys guzzle a couple of quarts of Bud for lunch and then go back to work assembling transmissions. You want to be the lucky new car owner that winds up with that gearbox? The factory couldn't get rid of these guys- the union didn't see a problem. There was one guy who, thanks to a change in job description, was making 60 grand a year washing cars between coffee breaks and nap time.
One of the in-house newspapers it was noted that $400 of every car the company sold went directly to paying retirees. Four hundred bucks of the customer's money buys the customer nothing at all!
Did you know that UAW workers get paid during a layoff?
The US car companies can't compete with Korea, and, as you say, China with such cost burdens.
Hyundai is building a world-class car for far less than anyone else because the company doesn't answer to any organized labor and has no hidden costs to pass on to the buyer. In case you haven't noticed, their sales are way up.
Which is worse? A reasonable pay cut now, or unemployment in the future? So far, the unions seem to find some kind of nobility in striking themselves out of work and then feeding off unemployment or welfare. Maybe you find it amusing to watch these guys go fishing with their bass boats while you go to work. I don't.
And when GM starts closing US plants and those poor, underpaid, UAW workers start sucking at the welfare tit- are you ready for your taxes to go up again?
-Carl
What percentage of manufacturing cost is labor? You're not telling the whole story here.
If we believe your figures, what's killing US manufacturing is excessively high wages. Though if you ask the customers, they're more likely to say it is excessively high prices.
The customers don't much care why prices are higher. It could be taxes, regulations, raw materials cost, labor costs, etc. To the consumer that's all irrelevant. What they care about is what they have to pay.
The great post-WWII boom in US manufacturing occurred when US products sold for prices comparable to the prices for Chinese products today. I don't think that's a coincidence.
In other words,US manufacturing has priced itself out of the market. We can argue about why that has happened, but that's the bottom line, and US manufacturing won't come back unless it finds a way to turn that around.
At this point, I'll bring out my theory of hamburger economics. For many years, the price per pound of a US made auto very closely tracked the price per pound for ground chuck. People who could afford food could afford a car. Example, in 1967 when ground chuck was just under $1 a pound, a fully loaded new Chevy Impala was $3400. I bought one.
But today a new fully loaded Chevy Caprice is $38,000 while ground chuck is just under $2 a pound. My hamburger budget can no longer afford a new US made car. If I were to buy new, I'd have to settle for a stripped KIA. I'm not alone in this situation. Many US made products are now simply far too expensive for most US workers to afford without going ridiculously deep into debt.
Auto workers are among the highest paid US manufacturing workers, and they get a deep discount from their companies for buying US made cars. But when I drive by the GM and Ford assembly plants here, I don't see many new GM or Ford automobiles in the employee parking lots. The workers simply can't afford the cars that they are building.
If cheaper imports (and used cars) weren't available, they'd have to take the bus to work. Your proposals to penalize US consumers with trade barriers would put more US workers on the bus, but it would be unlikely to generate more employment in US factories unless the price of US made goods goes down. And by providing a protectionist monopoly, lowered prices is the last thing consumers can expect to see.
Gary
Face it. There are no more jobs like this in the USA. Find some way to make something new that they might want to buy from us. Other option: we have a beautiful country. Explore. Innovate, enjoy. Teach your kids about our uniqueness in the world. This simple ideal is why most of the inhabitants of our planet find the US attractive. We love our stuff and the comfort. Ride a bike. Go skiing. Have fun.
Yeah, that's what the article says. But if you look in the far background of a lot of those pictures, the workers back there aren't wearing safety glasses either. Oddly enough, though, only 2 people in all the pictures are wearing any sort of glasses. I can't believe all the workers have perfect vision, so there may be something to the idea that they removed their glasses to look better in the photos.
That said, the plant looks a lot cleaner, neater, and better lit than many US fabrication plants I've seen. The workers also look cleaner, better dressed, and better groomed than what is typical for US workers. You get the impression that the workers take a lot of pride in what they are doing.
Gary
Nearly 100%. If you've bought into the "10 - 12% direct labor" figure and don't understand why I say nearly 100%, we can discuss.
Excessively high wages compared to what? Did we have excessively high wages
30 years ago? Manufacturing wages then were higher, adjusted for inflation, than they are now. Were they too high?I think that's the silliest parallel I've ever heard.
I don't know where you do your research, Gary, but it's in need of some brushing up. It sounds like it all comes off the top of your head.
What you're talking about is engaging in a race to the bottom, in which the lowest-wage country sets the standards for everyone else's wages. That's possible today, even inevitable if you do nothing about it, because manufacturing technology itself is a freely traded commodity. If you combine that fact with a free-trade ideology, you've just doomed yourself.
Read Alan Tonelson's book, "The Race To The Bottom." You'll see where your ideas are headed.
Ed Huntress
Fortunately, I was not there the day the fork truck park brake disengaged and allowed it to roll down the ramp into the block wall at the bottom. Unfortunately, Mitch was between the truck and the block wall, with no where else to go. Killed him instantly. The next day the plant manager spent most of his time bitching about OSHA wanting to see the records for all of the trucks. Strange how the managers put more value in the time spent down because they had to get out the records than they do in peoples lives. "Modern" business practice, seems to be a little behind the late 1800 practices. However, we can always say that execs and managers have negative value, better they get killed than a dog.
You're contradicting yourself- how can the US be the most productive manufacturing country in the world if the Chinese are becoming more productive at a rate even faster than ours? Does that mean China will become more productive than the US, despite having a 80 cent an hour peasant work force? If so, why _are_ we paying US factory workers $25.63 an hour? It's pretty obvious US manufacturing is not getting it's money worth.
Ed, look at your own numbers. 80 cents an hour vs. $25.63 an hour for what have to be similar jobs. How much value added does $24.83 buy? I mean if a former rice farmer can work on assembly line screwing together V8 engines for 80 cents an hour, what qualities does an illiterate drunk US worker possess that makes him worth that extra $24.83? Not to mention other bennies that push his true wages closer to $50. How can you justify a $48.20 labor gap?
Yours, Ed. You'll still have a job writing editorials on how US unions took the high road and didn't back down in front of those godless commies.
-Carl
Today's Detroit News/Free Press puts much of the blame on undervalued Chinese currency (government controls the value and it hasn't changed since
1994). Since you've done some research on the problem, I'd like to hear your opinion...TIA
The reason for that was that at the end of WWII the US was the only major industrialized nation left with an intact infrastructure. The rest of the world was either smashed flat, or was made up of remnants of a colonial infrastructure which held them to peasant level. So the US could allocate resources profligately without enduring any negative consequences.
But that day is over, and it won't come back barring a WWIII that again smashes the world while leaving the US largely intact (unlikely). Like it or not, the rest of the world either rebuilt, or is building up for the first time. The US is no longer in such a privileged economic position that it can dictate that the world's economy must be shaped solely for the benefit of its fat lazy overpaid and underworked middle class.
In other words, the peculiar circumstances of Eisenhower America that you dream about have come and gone. They won't be back. There are six billion people working very hard to see that they won't be back. We have to adapt to that reality.
Short of an imperialism that any civilized person would decry, 300 million people consuming 30% of the world's resources cannot be sustained in the face of 6 billion others who want to live and raise families too.
Gary
Because they have a lot of catching up to do. Overall, according to the IMF, the Chinese productivity is 6% that of the US. But that's a bogus figure, because it includes swarms of peasants tilling soil with sticks, etc.
Their manufacturing productivity in *export* industries is probably half of ours overall, with some categories, especially those in which exporting companies are foreign-owned, coming quite close to our productivity levels.
Probably not. Expect their export industries to challenge ours, however, in one category after another. The car industry is now running at about 50% of our productivity, but with much larger improvements each year than our rate (just under 4% for the car industry).
On what basis? Compared to what? Chinese workers? Most factory workers in the developed world are being paid something like what our workers make. When you add in benefits, most of Europe is paying more.
If you want to compare our workers with those in low-wage countries, you can say that we aren't getting as much for our dollar as we would if we employed people who have no plumbing and no cars. Is that what you're comparing us with?
How can you justify what *you* make? What makes you think you're worth, say, $5/hour?
If you read my first article on China, you saw an example of a Hong Kong moldmaking/molding company that moved to mainland China because their design- and manufacturing engineers were making too much in Hong Kong. They were up to almost $5/hour. Selfish bastards, those Hong Kong engineers...
It's all relative, Carl. Which way do you want the US to head? Toward two rice balls per day, with all of us commuting to work on bicycles?
Not likely. US manufacturing magazines depend on a healthy base of US manufacturing. Without that, I don't have a job, you don't have a job, and we all wind up shining each other's shoes.
Ed Huntress
It's mostly a strawman. If you don't mind my not wanting to type it all out again, you can read what I said about it in my second China article:
Ed Huntress
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