Labor is only 5% of the total manufacturing cost. Even if you pay $0/hr in china, the (lack of) cost of transportation + low price of oil/gas due to fracking makes the total cost lower. Though it seems to be true for energy intensive heavy industries ("energy intensive industries such as steel, aluminum, paper and petrochemicals"), not sure it works for low skilled commodity or labor intensive industries.
Looks like they're talking about more energy costs & also productivity advances relative to other countries.
This means more that cost of inputs (materials, transport of them, etc.) for hardware will go down in the US, while at the same time companies are getting more efficient per worker - reducing our exposure to foreign cheap labor.
Re: Welding - We're actually seeing a lot of advances in automated welding setup, etc. that will allow robots in the US to compete with Chinese welders.
I have a Panasonic Ya 102 welding cell that will do it for much cheaper. I have one part we make with it that has 12 cents of human labor per part, based on a $30 per hour operator cost.
What are you exactly suggesting everyone do? He could pay them $0/hr by not giving them the jobs.
You're not offering any constructive feedback while criticizing from your pedestal of inaction. I assume you used a throwaway because you didn't want to attribute that to your personal identity.
Billions of Chinese were lifted from poverty by American globalization, granted at the detriment of American jobs. However it forced American jobs to be more information focused. And if you're Chinese you should understand that. If you're American you can be proud you helped lift a country from the third world into the second.
This isn't a "well suck it up because at least you're getting paid /something/" issue. Chinese workers can still be beneficial to their country and the world while making a decent wage and without being abused.
American entrepreneurs are the best thing that has happened to China in centuries.
If it weren't for American capital, and the American consumer, China would have developed drastically slower (if at all). China's GDP per capita in 1994 was ~$480. That's ~45 years after the Mao revolution.
There was no alternative than to pay them cheap wages to start. If you paid them 'first world' wages, nobody would have set up manufacturing in China to begin with; those manufacturers would have kept that manufacturing domestically or sought out another cheaper source. The sole reason China boomed the last 20 years is that they had 250 million low-wage workers available and willing to do low-cost manufacturing.
If we're talking exploitation, the primary exploiters of cheap Chinese labor, are the 200 Chinese billionaires that have gotten rich off of leveraging their own impoverished workers - they own all the factories, the real estate, et al. China's wealth inequality puts every other country to shame.
> American entrepreneurs are the best thing that has happened to China in centuries.
American business is a significant reason China was so poor to start with. To understand China, I recommend reading what is meant by the 'century of humiliation'.
> There was no alternative than to pay them cheap wages to start.
They can pay less than American-level wages, and yet still pay a living wage and provide safe, reasonable working conditions.
> the primary exploiters of cheap Chinese labor, are the 200 Chinese billionaires
That someone else does wrong doesn't justify doing it yourself. Otherwise, everyone's standard is whatever the worst do.
I just don't understand how anyone could be OK with /anyone/ that takes part in this process. It's not okay for the "200 Chinese billionaires" to be profiting off of abusing others, just as it is not okay for Americans to be giving money to these people.
There is a difference between being successful financially and being able to sleep well at night.
It's like you didn't read his comment, there was no alternative. There would not be a factory, period, if they couldn't pay their workers at lower rates than Americans. It would not be financially feasible. It would lose money and not be able to buy raw materials and then close down and everyone would get paid $0. So when people say they are actually helping them by paying them more than $0 they are telling the truth. And by saying that you could never be part of that process, you are basically saying that you would be one to pay them $0, which is more harmful than the people that build factories.
So you would rather the billions of Chinese regress just so you can sleep well at night?
What is actually happening is good for them, and the majority of them will not side with you or even care how you sleep at night. There will always be casualties and exploitation of workers in China, but that's more due to corruption than it is to systematic underpayment of Chinese workers.
Experience suggests that most people rising to riches don't have any troubles sleeping at night regardless of what they've done. Just world fallacy and all that.
I tend to agree with you, but note that the opposing arguments aren't entirely invalid. Think of how many Africans were better off as slaves in the antebellum South than living as free men and women back home. Did that justify slavery?
There's a fundamental difference since the slaves didn't choose to be slaves, even if better off.
The Chinese factory workers are choosing from the options provided. From their perspective they've been given a better option. From a western first world perspective, people here can't seem to relate to how $3/hr could possibly be a better option, but it is. Over here we have the benefit of minimum wage, welfare, higher standard of living, etc. Unfortunately it is a very egocentric viewpoint to not think of this from the perspective of an actual factory worker.
"He could pay them $0/hr by not giving them the jobs."
I've always found that to be the absolute shittiest of rebuttals, given by those who have absolutely no point whatsoever. This person is not "giving" anyone a job; they are not being seeing a group of people and saying, "Hmmm, they look like they could use some work. I will create some and give it to them." No. This person needed some work done, and they were offering work. That's it. The person is not a "job creator"; those things don't exist.
"If you're American you can be proud you helped lift a country from the third world into the second."
And do we get to be proud of the complete and utter skull fucking the Chinese environment has taken as a result of that?
If you ever run a company you'll know that job creators exist.
I had a bunch of money. I could have kept it locked in a box somewhere. Instead I decided to pay a bunch of people to help make something cool. Yes, that's a transaction, but for my part, I didn't have to engage in it. (In fact some days I kind of regret it, given all the garbage one has to put up with when running a company.) I could have kept the money locked in a box and felt happy that I feel rich. Or something.
A person who runs a company is no more a job creator than a consumer who pays for services is a job creator.
If "I have money, and I have a thing I am willing to exchange it for that requires someone else to do work" makes you a job creator, everyone who purchases anything in the economy is a job creator.
Or, to spin it just as hard the other way: a bunch of people gave up half of their waking hours for years in order to help make your something-cool business successful, and accepted your money in exchange for that assistance. They could have stayed home or done something else.
"If you ever run a company you'll know that job creators exist."
No they don't. There are people who want work done, and people who provide that work. That's it. You're not "creating jobs" simply because you feel like you want to create jobs. You have decided that getting the work done will benefit you more than not having it done. That's it.
Environmental problems and abusive labor practices are problems and should not be tolerated. But they're nowhere close to accounting for the full discount in labor costs in China v.s. elsewhere.
Business owners factor costs into their strategies. They/we don't just have a bunch of jobs, and then go looking for people to fill them. China's cheap labor force has made possible products that wouldn't exist otherwise.
The situation is much much simpler than you're making it. And as someone said, if you were part of a company that provided these jobs in a direct or indirect way, you'd see it much more clearly.
Basically there are people there that need to make a living wage to pay for food, medicine, education, etc. The reality is without the $X/hr jobs they have no other options or worse options.
An external actor like you, me, or a business can sit around talking about how shit it is, or go in and offer something at least slightly better. You're basically trashing the people who decide to take any action at all (giving them a low paying job). If the action isn't taken, they go back to their worse option. From your perspective you are failing to empathize with the Chinese because you don't see their other crappier options or can't imagine that they could possibly have crappier options.
I would very much like to hear a somewhat detailed overview of how you think the "right" way to go about this is - and please don't use meaningless terms like "fair" instead of numbers, otherwise it's a total waste of your time.
Hey, while we're wishing, for my part I wish that everyone made $1B/hr! (After accounting for inflationary effects, of course.) Private jets for everyone!
But back in real life, while $3/hr may not be a lot compared to what some folks make, it's $3/hr more than someone making $0/hr makes, and it's triple what someone making $1/hr makes, and indeed a full 50% raise for anyone making $2/hr.
If I could wave a wand and give everyone who currently makes 0, 1 or 2/hr the skill set and the opportunity to suddenly make $3/hr, I'd be happy to do it. And the billions of people (hundreds of millions maybe?) who suddenly got (in their terms) a huge raise would be pretty happy about it too.
I'm not sure you would be as quick to sarcasm if you spent some time in Chinese factories. It's a though life, even in the good ones. As the purchaser you have a lot of power over the process, not just at one factory, but in which factory you choose. To me that also means you have a responsibility. The least anyone working with Chinese companies should do, is to go and look at the factories.
Yes, it's a tough life, but people actually pick that life because other options are tougher (for example being a rural farmer somewhere).
It is true that we should care about conditions in factories such as these and work to improve them. It's also true that if you insisted that Chinese workers get paid what American workers would, there would have been almost no factories and the entire country would still be in desolate poverty. Yes if there were no factories then probably the environment would be in a better condition.
It's a very complex situation. Just picking one angle to it and insisting that angle holds the whole truth does not help anyone.
I think a lot of western consumers would be more than happy to pay just a little bit more if the $ was going into those workers pockets. But how do you make sure it gets there rather than into the pockets of the factory owner / local politician, where you will already find many, many hundreds of millions of dollars (that "could" have been paid to the poor Chinese factory line worker, rather than to such things as buying some 18 year old son studying in Vancouver a new Ferrari).
Do leaders (political & economic) in non-western countries ever deserve any responsibility for their countries overall well-being?
No, it's not simple at all. You might not wish that anyone make $3 an hour, but neither do you have the ability to provide everyone in the world with jobs that pay more than $3 an hour. The argument from classical economics is not that low wages are good in themselves, but that the best system is where wages are set by the market, and wealth redistribution is done by the government and private charity.
> China is technically communist right? Shouldn't they be being taken care of by the state anyways?
They are not actually communist; they are an authoritarian state controlling a capitalist economy. They started down that path in the late 1970s under Deng Xiaopeng.
Before that, the state did a very poor job caring for its citizens. Millions died of starvation, persecution, and other ills. Look up the Great Leap Forward and Cultural Revolution, two government programs, as examples.
After that, probably never in the history of humanity have so many in a time and place escaped poverty as those who have in China. However, the country is so large that there are still many that are very poor.
Speaking from a Chinese perspective, $3/hr in China today is still very low. That's like 3000 RMB for a 9-5 blue collar (which doesn't really happen as many workers work between 12-16 hours a day). But there are just so many expenses you cannot avoid while living in China as a Chinese... $3000 - $5000 is barely enough.
Wait, what. I've lived in Beijing in 2013. You can live off 3000RMB/month = 500USD/month. That's far from being rich, but also not barely survivable. Everything was cheap for me, and I'm from Poland.
I specifically said living in China as a Chinese, so to be exact here Chinese means the Chinese local with family. I don't know much the life of foreigners / immigrants and how well they integrate into the society, but usually there are
* wedding gift
* "business" expense that you did out of your pocket (take your co-workers to lunch, buying gift for your clients)
* gifts (giving red envelopes during Chinese New Year, friend / elder birthday)
* rent
* personal saving
* family support (especially supporting your parents)
* medical expense (for a lot of people they have to pay before they can see a doctor)
Here is an article http://business.sohu.com/20131210/n391561808.shtml. Many people can only afford a tiny room today in the city and this depressing phenomenon is coined "蝸居" (snail house, about 10 square feet, and sometimes less, or sharing that tiny space with two or more people), and has been televised and documented multiple times (e.g. a TV drama called 蝸居 was made a couple years ago).
If you are a blue collar working at a city far away from your hometown, you have to go back to your hometown at least once a year (during new year break), and usually it is expected that you have to get a lot of gifts from the city for your family and your neighbors (to thank your neighbors for helping your family / keeping an eye on your family in your absence).
You can almost say the Chinese culture is all about showing gratitude with gifts, this is why e-commerce is such a big deal in China (also why foreign brands like Apple can make so much money in China ;-))
Interesting. So what is, in your opinion, the percentage of earnings an average Chinese spends on maintaining/extending his "Guanxi" and on supporting his parents/presents for relatives?
I am asking about these two specifically because they make the biggest difference between the "western" culture and the Chinese culture. The other items on your list also appear in the lives of the citizens of many European/European based countries.
I'm sure you can live in many places with even less than that, but claiming that you were not merely surviving with 3,000 RMB/month is delusional.
Costs in the large Chinese cities (which includes Beijing, Shanghai and Shenzhen) has been steadily increasing over the past couple decades. It can still be seen as cheaper to live depending on what you compare it to (e.g. SF) but to give a point of reference, Shenzhen is on par with Berlin in terms of cost of living (http://www.expatistan.com/cost-of-living/comparison/shenzhen...). Shanghai is actually more expensive than Berlin too, Beijing is slightly cheaper.
I couldn't have comfortably lived in Shanghai back in 2005 with 3,000 RMB, and I'm extremely frugal (I don't drink, don't smoke, don't go out and my main hobbies include working out and reading).