This is a great article talking about the fact that US jobs are not coming back from overseas. I used to be a strong believer that when wages increase in China (which they already are) you will see some jobs come back to the states. I changed my opinion when I read a great piece talking about increased Chinese wages simply leading to automation in China.
This article finally kills all hope I have for American jobs coming back.
While I hate reading anything in the NYTimes, the article was pretty in depth and insightful. I encourage anyone who is interested in the topic of outsourcing to read through this. It really highlights the level of competition we have in the world.
I was actually thinking about writing a post in a similar vein: about how ironically smug most Apple users are when their devices are basically manufactured in Chinese torture mills:
http://www.businessinsider.com/apple-child-labor-2012-1
run by a guy who considers his employees "animals":
http://www.businessinsider.com/foxconn-animals-2012-1
Enjoy that cheap iPhone, hippy, knowing that you're trading on another human being's misery.
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The photo in the first link reminds me of our first year analysts...
"I used to be a strong believer that when wages increase in China (which they already are) you will see some jobs come back to the states."
Really?
Absolutely. Across the spectrum of manufacturing there are some products that have high labor costs and some that have marginal labor costs. With the increase in costs to ship products and the increase in labor costs, some marginal manufacturers could have come back to the US.
I no longer think that will happen at all, because of previous readings and now this article.
And as an Iphone owner I support slave labor to produce my product. Just like buying diamonds results in children losing body parts. How people can not know the effects of the products they buy is beyond my comprehension.
Sure, select manufacturing will return, and I've heard of some cases anecdotally. But the majority of Chinese jobs being displaced because of labor costs are going to neighboring, lower cost countries (varies by industry). But why would consumer tech jobs come back to America? The whole supply chain is over there. The article states it, but that's not news. Corning has restarted capacity in a Kentucky plant for Gorilla Glass, but that's an exception; they did that to ramp a new product.
The world has been built on misery and will continue to be built on it. The pyramids in Egypt weren't a fun endeavor.
We can't compete with China or many other countries on manual labor. Period, end of story. No one is going to pay American workers $20 an hour to build a car while workers in China, with a much more submissive culture, are willing to work for $2 an hour. China has the manpower and industrial resources to have far larger and far more intricate supply chains than the US could ever achieve. The US MUST focus on innovation, product development, and hard technical skills.
Sorry folks, but the "good old days" of Americans being insulated from foreign competition are over.
Conclusion: If you don't have technical skills in this economy you are SCREWED.
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Very interesting article, thanks for sharing. t's hard to imagine that we can compete against China's manufacturing powerhouses. While reforming America to be more competitive will certainly be helpful, I think we will also rely on fundamental changes to China's economy if we are ever able to see a dramatic shift from the current status quo.
There is no reason to be pessimistic about permanent high employment. US just has to focus on something else than cheap manufactoring.
permanent high employment will cause social unrest.......history always repeat itself.
American companies are also operating on a global scale now. Apple sells all over the world so the argument can't be made that Americans are screwing themselves for cheap electronics.
A few items I found interesting in the article was Apple saying how they needed technical workers and only China could provide them. They needed something like a 2 year degree in engineering, which is what China does well.
Whenever people compare the engineering education in China to the US, they ignore the fact that an engineering degree in the US = 4 year degree, while an engineering degree in China does not always mean 4 years of schooling.
Also, the story about the American engineer who is now making $10 bucks at a temp agency clearly illustrates why America is failing. The guy gets a good job, shits out 3 kids and buys a house with a pool. Compare that to the Chinese couple working two jobs, living in an apt with family and with one kid, saving 1/4 of their income.
Had the American decide to have one kid and live in a modest apartment he could have saved a ton of money which would have allowed him to retrain, relocate or survive a downturn. It also says how this guy quit his $10 dollar an hour job because it was better for him to look for work. Seems like a dumb thing to do unless you are getting paid to look for work.
He also balked at working Saturday's "because I want to watch my kids play soccer". Why are his kids playing soccer and not studying or working a weekend job? Why is this guy not earning and working, instead of focusing on a trivial thing such as a kids game.
If we continue to be so soft and pathetic, we deserve to lose our dominance in the world.
The whole point of working is to watch your kids play sports and chill with your friends and loved ones. I think you may have it the wrong way around. This guy doesn't care about "world dominance", why should he?
(Please correct me if I'm wrong) To my knowledge, no one is worried that Greenwhich Connecticut is losing out on all of the sweatshop jobs in Ecuador and is trying to bring misery and austerity to the lives of it's inhabitants. Why? They could't be bothered to do that kind of work for such low wages. Its a sign of progress!
My point is that watching your kids play a game is not something you do when your job is on the line. This guy made decisions numerous times, from having 3 kids, to buying a house with a pool, to not seeking retraining or quitting his $10 an hour job because it would be "better" to be unpaid and look for something else.
His main goal is to put food on the table and earn money to provide his child with an education. Playing soccer is not necessary, nor is this guy risking his job (which he ended up losing) to watch a game.
At the end of the day, I could care less about world dominance. I am entirely focused on myself and my family. As someone who has relocated for work, who has gone back to school and will most likely go back again, who realizes they are a commodity and must create value to be rewarded, I approve of the society we are moving towards (or are already).
I'm not too worried. China will have fewer laborers in 20 years than they have today. Meanwhile, the US has a whole lot more natural resources than China, and resources per population is really what drives affluence over the long term. Finally, more automation is going to mean that the Chinese worker is going to become less relevant.
This is a great time to be saving money.
A few general points: - Countries don't compete. Companies do. David Ricardo figured this out in the 1800s (comparative advantage), trade is not a zero-sum game, etc...
Your politicians talk about competitiveness because they are responsive to US corporate interests, not US consumer, labour or national interests.
Chinese wages are miniscule. However, their wages and standards of living will rise gradually as/if their capital base increases and they become more productive. This is good for you guys. You'll have wealthier people to trade with and demand what you produce.
I think retraining your workforce and labour mobility between careers & industries is key. Your system needs to find a way to do this. The US probably needs to ensure that enough of your workforce has the basic science and maths background.
Your country doesn't suck as much as you think. If you asked most people what they would choose if they had the choice of being born American/English/French/German/Italian/Spanish/... or Chinese, I'm sure they wouldn't choose the latter. Your probability of being born into a decent lifestyle is far greater that way. Cheer up!
Points on the NYT and other articles: - Slave labour / Pyramids / "Animals" ... There might be X00,000 apple supplier related jobs in China, but that's because they use slave labour. The alternative would be to use machines in China, the US or another country. The alternative is not going to be American slave labour.
I like Rick Santorum's idea of eliminating the income tax/corporate income tax on American manufacturing. I know that would be a cluserf*ck of a complicated bill to write, but I like the concept in principle.
is outsourcing going to end U.S. economy? I hear that even many of the work for lawyers, accountants, engineers, and even some parts of finance will be outsourced overseas.
It's, sadly, not just menial manufacturing labor work that is being outsourced to China. Many law firms and even Big4 accounting firms are outsourcing a lot of work to India, China, etc. While supply of labor in U.S. stays constant, demand for labor will go down... along with the wages of American workers.
Absolutely, everyone harps on and on about manufacturing being outsourced, but I've been hearing from friends about many SKILLED jobs also getting offshored. In my field (life sciences) for instance, PhDs are having a really hard time finding suitable jobs, in part because all the pharmas are dismantling their US R&D ops and opening massive research facilities in industrial parks in China.
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I think the future is bleak for additional reasons. Like Japan, China is beginning at the low end and is more than up to the task of moving up to the high end of manufacturing when they develop their own brands. Japan used to make cheap crap that fills penny stores. You know how that turned out. Difference is that the US beat Japan in a war and could impose the Plaza Accords. We never beat China in a war and they are free to cut deals with the likes of Iran and India and revalue according to political convenience and not at the point of a gun.
China is by no means only capable of making cheap crap. Do you think Apple products are crappy? Hardly. When they develop their own domestic brands globally they are going to offload those crappy low-end manufacturing concerns to the fourth world and US "manufacturers" are going to lose their labor cost advantage through the offshored contractor model. Then the fun really begins for us white collar workers.
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Want another reason why middle class jobs are disappearing in America (from the labor supply side)?
http://www.zerohedge.com/article/entitlement-america-head-household-mak…
Families are better off on entitlements than in middle-class jobs. Game over.
North America is moving towards a knowledge based economy, the fields very people on this forum work in and thrive in. Apple's main product managers and creative brains are still all us based are they not? Why do you care where your iphones are built?
The problem, of course, is that in a knowledge based economy the intelligence requirements mean only about 15% of population gets to participate (IQ of 115+).
A NYTimes article espousing the virtues of communism, government subsidies, and central planning?
I am Jack's complete lack of surprise
Just a few people in here who get it. Don't think of China as a country winning the economic war and US losing.
Intuitively, think of US' economy as being in transit (as it always has been) in transit from low value added to high value added labour. US companies have outsourced it's low value added labour to some entity whether it's China, machines, or monkeys, just because it's only way to do so if you as a company want to stay competitive. It means US as a whole is winning, productivity going up, instead of losing. Even Dollars sent to China will come back to US, as Dollars don't buy anything in China.
Only problem might be that a large part of the labour class might have the wrong skill set for today's new economy. Also there is a credit crisis going on leading to temporarily higher unemployment.
As certain skillsets get more in demand than others, income inequality might rise, which government could pass laws for to supress if they see the need for it.
Of course if you were born in pensylvania and your goal in life has always been to be a low-skilled factory worker for the rest of your life, you are f*cked.
*grabs popcorn
If you want to get all illegal immigrants out of the US just give 5 years jail time to anyone employing one and make it mandatory to ask for ciitzenship before employing anyone. Now, go do that and lets see what happens ;), Id love to see that. You also need to take into account that you are not the only country who competes in high end manufacturing, German system works a lot better in that respect, not only because of the different levels of skilled labor they can deliver, but also because of costs of training and flexibility/skills in basic education (yes, me again with the comment about Germany :D).
I think everyone is missing a key point of the argument around manufacturing outsourcing - it's not so much that the labor is cheaper, but that the entire supply chain infrastructure is more oriented around Asian countries than the United States. Moving manufacturing back on-shore requires moving the entire supply chain as well, which includes the labor associated upstream in the supply chain. Once you factor in the eco-system, the extra $65 in labor costs quoted by the NYT article for an iPhone increases dramatically, as each component cost also increases.
Simply put, unless the US government is willing to directly subsidize the actions required to re-build an entire manufacturing ecosystem, the economics are stacked against the US.
Not all is lost: http://online.wsj.com/article/SB100014240529702043313045771429832080386…
I think that you should consider that working in manufacturing is not appealing to everyone or should I say anyone, that's part of the explanation why this jobs are disapearing in developped economies. ((be it in the USA, in the UK or in France, only Germany still as a decent manufacturing sector). As soon as young gradutate can chose anything else they will. That's a job that men (or women) do when there is no other choice, like in the BRIC. There is absolutely no reward doing this job: pays is low and it's boring as hell. Do you see yourself puting together computers for 45years ? Of course not.
But whatever, sooner than most think everything will be done by robots.
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