I'm aware of the marxist theory that all value is labor. I won't buy into it for the purposes of this discussion, however. We're comparing manufacturing costs here against manufacturing costs there, and for that purpose, the 10% of direct costs as wages figure is correct. So 96% of 10% is 9.6%, meaning that the difference in direct factory wages have essentially the same impact on product cost as OSHA and EPA regulations. And neither accounts for the much larger difference in product price for US versus foreign made goods.
Yes, grossly so. In your own words, we had an underworked and overpaid middle class 30 years ago. But as noted above, that's only a small fraction of product price. Domestic manufactured product prices have grown 12x over the period (my example of a $3400 car then to a $38,000 car today). Not a lot of that can be attributed to wage growth.
Not a parallel, just an observed fact. Demand is elastic, and consumers have price points where they become resistant to making a nonessential purchase. For many goods, the US manufacturers have grossly exceeded that price point. As I recently told a car salesman, I'm not about to pay more for a damn Chevy pickup truck than I paid for my house.
You should perhaps spend less time poring over GDP figures and more time talking to customers. In non-command economies, their micro-economic decisions are what ultimately drives the macro-economic figures.
That's not marxist theory, Gary. That's what you get when you track down actual manufacturing costs and compare them between the US and China.
Everything in China is cheaper because labor is so much cheaper across the board, and because many of the intermediate products and services (most component parts, transportation, most raw materials, even plant construction and maintenance) aren't traded on world markets. Their taxes are based on about the same rates as ours, but they pay much less in taxes because they make less and because everything costs less.
If you ignore this vital fact, you'll never get it. You'll never understand how the Chinese are able to build injection molds and deliver them to US customers for 30% of their cost if manufactured here. It's elemental to understanding our trade situation and the threat to our manufacturing.
I don't understand what you're concluding here. Yes, direct manufacturing labor costs are only a small part of the manufacturing cost difference. No, that doesn't explain very much. What *does* explain very much is the effect of such low wage rates on the entire supply chain of materials and services. Add them all up, and they're close to 100% of the cost of manufacturing any product. And the difference between those TOTAL manufacturing costs in the US and China is huge.
It sure looks great in retrospect, doesn't it? Until we started to get bombed with products from low-wage-rate countries, it worked pretty well. Every major trading country played the same game, and we all made out nicely. Henry Ford got the idea when he doubled his workers' wages.
As noted above, labor cost represents almost all of the cost of any manufactured product. Somebody has to mine the ore, smelt the iron, roll the steel, drive the truck, and keep the books. When everybody is making high wages, compared to those in some other country, costs are high. Then you have to decide how much benefit it is to you to trade with low-wage countries on the basis of their absolute wage advantage. There are benefits, and there can be enormous costs, especially when your balance of trade goes more negative than the ability of your economy to create comparable-quality replacement jobs.
I don't get the point here. But your conclusion about wage growth is not correct. Average individual money income in 1967 was $2,464. The same income in 2001 was $22,851.
formatting link
in electronic fuel injection, airbags, and a DVD player, and you're in the same ballpark, in terms of car prices as a percentage of income.
Vehicle prices are about the same percentage of individual incomes as they were in 1967, and 1957, and so on. They've remained very stable throughout our entire lifetimes. That's more or less the basis on which car prices have been determined. The market for cars has grown substantially; it hasn't declined.
I agree that microeconomics is badly overlooked and is poorly understood comopared to macroeconomics. But first, you have to start with accurate figures, or you're trying to theorize with junk data.
On Sun, 12 Oct 2003 12:28:36 GMT, "Mike H" wrote something ......and in reply I say!:
Actually the whole article had a sort of "infotainment" feel about it to me, before I even read this....
****************************************************************************************** I walk out into the silent, lonely, country night. Man's work is nowhere evident. The canvas above is devoid of the ever-spreading fluorescent glow of ground-based light sources on dust and smoke. It is streaked with wandering cloud, lit to silver faerie floss by the moon. The stars are alive with cold, sparkling clarity. The beauty is indescribable. My piss flows frothily and noisily into the gravel at my feet. Sometimes you have to do what you have to do.
Nick White --- HEAD:Hertz Music Please remove ns from my header address to reply via email !!
The articles are so good that I printed them out to sit and _read_ them. Clearly, what you state is what is happening. You have arrived at the question - now that we know what has happened what can be done to fix it. The legislation outlined doesn't seem to address the central issue, the enormous sink of Chinese workers. It's not dumping when they _can_ make a product cheaper than you can. What actions would you suggest to increase the chances that our kids can make a fortune in manufacturing and support us in our old age. I'd also like to hear from the other guys in the trenches. Ray and you other fellows that compete directly- what can be done to get us out of this mess?
Why not? Much of assembly line work is broken down into tasks simple enough for a well trained monkey. You don't need a Phi Beta Kappa key (or indoor plumbing) to hang wheels on a car.
True story: A US car plant was having terrible door/hood/trunk fit problems despite the fact that an inspection machine was used to detect misalignment. The problem was traced to the fact that the workers assigned to adjust the doors/hoods/trunks couldn't read and therefore couldn't understand the computer screen on the inspection machine and didin't adjust anything. They stood around 8 hours a day doing nothing and getting paid quite well for it.
How can you say these guys are any better at building cars (or any production line job) than Chinese peasants would be?
Hell, the Chinese peasants probably work with a lot more gusto than the US workers, secure in the knowledge if they screw up, they'll be back plowing the fields. No one wants to step in ox shit.
How are the US workers worth $25.63 when they can't read? Or when they stand around 8 hours a day and do nothing?
And what would you do, Ed? Close the borders to imports? Yeah, that'll work. See how well local content laws worked in Brazil or East Germany.
Ed, every time a US industry is threatened, they blame the aggressor. When the Japanese started building high-quality economy cars, the US car companies all cried they couldn't compete because the Japs will work for a bowl of rice. When Korea started building ships, cars, and computers, it was more rice bowls. When factories went up in Mexico, it was tacos. Now it's China and rice again. Do you see a pattern here? The US industry gets fat, dumb, and happy and then cries foul at the first inkling of foriegn competition. It never thinks of ways to compete.
One big step would be to let dollar float where it really belongs to the other countries money.Canada is my biggest problem--60%+ of the imported molds come from there. How do you draw a line and say on this side the $=$ but on the other side (Canada) its only .68 cents? We have the same standard of living.The next thing is the molds made in China (most) are so bad that the customer comes back to me after they fire the new save a $ purchasing agent or he moves on to screw up another good co.Almost all the engineers I deal with (except the few that have female friends over there) would rather have American tooling 1st then canadain. What kills me is when whole plants or product lines move , then the tooling never comes back and we all make Wal-mark richer Ray Mueller
IIRC, you can burn water with fluorine. (well, steam) However, if that sort of fire is going on, I'm going to be the one running away fastest, without bothering to try to put it out. Fluorine is nasty stuff.
Carl, you apparently haven't been following this tale through its entirety. Ed has never suggested protectionism, and has pointed out its folly to those who have.
Jim
================================================== please reply to: JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com ==================================================
On Sun, 12 Oct 2003 13:25:07 GMT, Carl Byrns wrote something ......and in reply I say!:
I am Australian, I assume you are American. We face similar problems. In addition I might say, many small countries such as ourselves see most of our money going overseas even if the US _could_ hold on to its jobs.
You are adopting a completely one-sided stance, and seem not to realise the inevitable consequence of what you are saying, under globalisation in particular.
Union workers are "pricing themselves out of the market" at least in part because they need the wages to buy the products they make, to support the industries that employ them and make huge profits doing so. These same industries spend billions of dollars anually trying to encourage the overpriced workers to keep buying more and more. I am not aware how many of the US cars, for a big instance, go overseas, but I bet it's a small percentage. This would have been very much so until quite recently, I would think.
But the lower paid workers in Singapore will not be able to buy the very products they make. Singapore will probably export huge portions of whatever it makes.
The workers would have accepted a "small pay cut" until the next one, and so on. Even given that this particular factory was altruistic enough to keep trying, in the end competition would have resulted in the closing of that factory.
And again, the Chinese workers are so underpaid that they will not buy the cars.........unless (and surely they would not do this!) GM sells them very cheaply, thereby starting the cycle of expectation again, making profits, driving up wages, then moving on when it starts to look more attractive elsewhere. And of course they would _never_ then export those same cars back to the US at a greatly inflated price would they? (it's all that damned polution and compliance stuff that made us quadruple the price yer honour!)
Those guys are not working for peanuts because they _want_ to. They are doing it because they have nothing else.
I hope you are adopting the stance that you are only for the sake of argument. As with many people who espouse extreme conditions as the answer to some situation, you seem to feel that in the world order that equalled China's, you yourself would be very comfortable. If you are a business owner, then that _may_ be financially true.
But if you could live with the mass of US, European, South African, New Zealand and Australian citizens backing down until they were living at Chinese economic and safety levels, to line your pockets, and _still_ be comfortable, well....
That is where it would end, because as long as there is more profit to be made, and profit is the overwhelming motive of industry, if somebody offers cheaper costs per product, the job will go there.
There was a time, I think, when the memories of world war, less communication and transport ability, and national pride prevented this, because an American company was an American company and proud of being able to support the country's economy. But this is no longer so. "American" (and the others as well) companies are now simply international, with proft, or even worse "return to the shareholder" (most of whom have absolutely no knowledge of or interest in what the company actually _does_), being the _only_ motive.
****************************************************************************************** Whenever you have to prove to yourself that you are not something, you probably are.
Nick White --- HEAD:Hertz Music Please remove ns from my header address to reply via email !!
There is no way the best factories in China are 2/3 as productive as even the average U.S. factories, and what I've seen tells me that they're at best only 1/3 as productive. This may be why Honda has estimated that its Chinese parts factories will be only 30% cheaper than those in Japan and North America, despite wage disparities being much, much greater (rule of thumb: Chinese labor costs are essentially zero). And even when the factories are identical, productivity almost always significantly lags in the lower-wage country.
The prime reason for job losses in the manufacturing sector is productivity improving faster than sales, just as has been the case with farming for almost a century.
jr> Ah, but it's more than the 'low end' jobs that are begin outsourced.
jr> Great article in the NY Times last week that says there's a bunch jr> of investment houses that are beginning to open branches in India jr> and hiring analysts from those counties. Of course right now jr> they say 'we're only sending the scut work overseas' but I think jr> this is the same thing that GM was doing when they said 'we're jr> opening that engine factory so we can sell the cars in, um, jr> China.'
jr> If I were running a software company or an investment house, jr> and I could hire software engineers or MBAs and PhDs at jr> half the cost to run my operations, I'd be stupid not to jr> take advantage of that.
The software industry has been doing this for years. The results are mixed, but there is no doubt that you will face increasing competition from low cost countries in this field as well.
jr> It's interesting to hear all the handwaving and backpedaling jr> when the company speakers explain why they're not just moving jr> most of their operations overseas.
jr> Jim
jr> ================================================== jr> please reply to: jr> JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com jr> ==================================================
In the first place, those are per capita numbers, not per worker numbers. Minimum wage in 1967 was $1.65 an hour, which would equate to $3300 a year, and most workers in manufacturing made more than minimum wage. But there were many fewer women, and basically no children, in the work force in 1967. In other words, they made zero, but your figure averages them in to come up with the low per capita figure, which is not reflective of actual wages.
OTOH the 2001 figures reflect a work force with nearly full employment of women. That pushes the per capita figures closer to actual wages.
A more accurate and relevant figure for 1967 can be drawn from table P-8
formatting link
. Here you'll find that the median income for males 35 to 44 was $7,636. That is $33,137 in 2001 dollars. By contrast the 2001 income for males 35 to
44 was $41,104, which represents a only 24% real increase over the 33 year span.
Not so. As more correct figures show, a $3400 car could be bought by a
35 year old male worker in 1967 for 3400/7636 or 44.5% of his annual income. But in 2001 the numbers are 38000/41104 or 92.4% of his annual income. That's a better than 2x price increase with respect to same year wages.
So while incomes corrected for inflation of equivalent workers have increased by 24%, auto prices corrected for inflation have increased more than twice as much.
the answer is simple and clear gentlemen, we have to get over to china and start labour unions there, pronto. yes indeed, a subversive campaign to educate the chinese workers in having and needing unions to up their wages so they can live like Americans. production costs will skyrocket and th erest of us will be ok....
(-:
swarf, steam and wind
-- David Forsyth -:- the email address is real /"\
formatting link
\ / ASCII Ribbon campaign against HTML E-Mail > - - - - - - -> X If you receive email saying "Send this to everyone you know," / \ PLEASE pretend you don't know me.
yes to the bicycles (then you can beat the middle east too, by not needing their oil and they'll all go bankrupt, that's the real way to beat Saddam and friends)
no to the rice balls. no way....
yes.
swarf, steam and wind
-- David Forsyth -:- the email address is real /"\
formatting link
\ / ASCII Ribbon campaign against HTML E-Mail > - - - - - - -> X If you receive email saying "Send this to everyone you know," / \ PLEASE pretend you don't know me.
I'm real curious about why you think that should have led to such a big social and economic change in the US. What's your rationale? With numbers, please. No fuzzball theories.
PolyTech Forum website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.