Visit to China

[Indy Lurker]

A friend of mine just came back from a business trip China, and I thought I'd share his findings.

First, he went to visit customers. He makes one of the few products that I know of that is actually imported into China.

He visited several factories, some with as many as 5000 workers.

The average worker was paid equal to $2-$3 (US) per hour, and the engineers (with 4 yr degree) were paid $800/mo or around $10k per year.

The work week is 6 days and 10 hrs per day, no overtime is paid. about 1/4 of the workforce lives in "dorms" on company property, 10 bunk beds to a room.

The employees are very happy to work here, as this is considered great pay, and the company is looking to improve safety, like eliminating employee exposure to lead within the next year.

As bad as this news is, the owners of the company, is looking to move production to other countries, as labor in China is getting "too expensive"

As far as I know, all of this is accurate, I have no reason to doubt my friend, and he seems to believe he was getting honest info from his customer, but it's now third hand.

[Deja Q]

1. $3/hr is too expensive? Somebody shoot these inhuman filth now.

Bunch of animals, that's all they are. Uncivilized and devolved and anti-team.

[Warpy]

10. That's a result of currency exchange rates

that $3 US goes a hell of a lot farther when you exchange it for yuan in China.

Those $3/hour workers living in near prison conditions are earning enough to support themselves, buy a few luxuries, have a social life on their day off, and support their elderly parents in the countryside.

It doesn't supply the bare necessities in the US like a bed in a shared and crowded apartment, food, clothing, and routine medical care.

The US worker isn't competing against a third world worker willing to live cheaply. The US worker is competing against a DISADVANTAGED CURRENCY.

This is what is so unfair. There is no way a worker paid in dollars can compete with a worker paid in yuan, bhat or rupees.

[oblivious]

2. This article is depressing.Even China is rapidly losing manufacturing jobs

China Losing More Manufacturing Jobs Than U.S. But Adding Service Jobs at a Rapid Pace

July 8, 2004

China is losing more manufacturing jobs than the United States. For the entire economy between 1995 and 2002, China lost 15 million manufacturing jobs, compared with 2 million in the U.S., The Conference Board reports in a study released today.

"As its manufacturing productivity accelerates, China is losing jobs in manufacturing – many more than the United States is ...

China is rapidly losing manufacturing jobs in the same industries where the U.S. and other major countries have seen jobs disappear, such as textiles. Matthew Spiegelman, Economist at The Conference Board and co-author of the study, notes: “The U.S. lost 202,000 textile jobs between 1995 and 2002, a tremendous decline by any measure. But China lost far more jobs in this sector –1.8 million. All told, 26 of China’s 38 major industries registered job losses between 1995 and 2002.”

...In addition to the losses in textile manufacturing, industries with the highest job losses included steel processing (557,000), machinery (588,000), and non-metal mineral products (429,000).

...This pattern of job loss is repeated across the manufacturing sector. The only three manufacturing industries showing any substantial job gains in China are electronics and telecommunications (374,000), garments (160,000), and leathers and furs (129,000)

http://www.conference-board.org/utilities/pressDetail.cfm?press_ID=2432

[Indy Lurker]

3. On the plus side

Only 15% of US jobs (farming not included) are in manufacturing.

Frankly, if China can't keep manufacturing jobs at $3 per hour, we should just let the manufacturing jobs go.

The key, is to do a better job of educating our citizens, so they don't need to be in manufacturing (I say this, even though I'm in manufacturing)

Also, keep in mind that labor is only a part of your production costs.

Manufacturing plants in China don't have to worry about OSHA, EPA, Worker Comp, Health Insurance, or Unions (not just pay, but all the other costs of contract compliance).

Oh, I forgot to mention when my friend stepped out of a car in one town, his throat and eyes started to burn. This was in the town that was down wind from the plant.


I don't see these companies coming up to US standards, and I don't see US companies competing in most cases.

[Old and In the Way]

5. There are 2 types of manufacturing companies in China.

One devoted to the export market, one devoted to the internal market. Export businesses do have ISO standards because their customer's demand it. The domestic market businesses aren't nearly as rigorous on their quality/manufacturing standards because their consumers are buying 'lowest' price and that translates to cheapest costs. These factories have the worst labor conditions and pollution problems.

I think you'd be surprised about the Chinese concerns about the pollution though. They are coming to realize just how awful the 'South China Haze' is becoming. We had a 100 years to see and react to the dark side to industrialization. They've gone through that curve in less than 20. Pollution control technology and civil/environmental engineering are becoming hot areas for job seekers today.

[idlisambar]

8. good posts, but I take issue with one point

"we should just let the manufacturing jobs go"

It is understandable that the focus of most of the attention would be the job losses as our nation continues to disengage from manufacturing, particularly since workers here in the US don't have an adequate support system. However, speaking more broadly the main problem is that our industrial capacity is faltering; the loss of jobs is a secondary effect. Unlike China, we are losing the ability to provide for ourselves as a nation.

It is one thing to lose manufacturing jobs due to productivity increases, but quite another to lose jobs that would otherwise be there if we had the industrial capacity to support ourselves.

[oblivious]

9. I agree. It's just unthinkable to let manufacturing jobs go.

If you don't make anything, where does the wealth come from? Even the money to pay for oil imports. Service jobs are being outsourced offshore by the millions, foreign tourists and students are being discouraged from coming to buy US services, and so forth. You can't sell debt forever. There must be a day of reckoning.

The US has the world's greatest market to support manufacturing. Why help to competitors to grow at your expense? I think it's madness.

[Warpy]

11. Hasn't it occurred to you what "letting manufacturing go"

has done to this country's security?

We no longer make cloth. We no longer make shoes. We no longer make consumer electronics, and much of the electronics components the military depends on are now made in offshore factories. We don't make many pharmaceuticals, although most of Big Pill has corporate headquarters here. We don't make enough bullets to supply IRAQ.

Are you getting the picture? Think about Jebbie following Idiot and pursuing the same imperial policies.

We will NOT win the war that follows. We can't win, not without making the things that will keep us going.

THAT is why "letting manufacturing go" is STUPID and SELF DESTRUCTIVE.

Besides, your job is likely to follow. They're offshoring office work through the level of middle management.

[Old and In the Way]

4. I can vouch for this.

I was over there in late April. Interestingly, the South China labor scene is starting to change. After Chinese New Years this year, I heard that almost 10% of the workforce did not return to the factory that were employed at. Many stayed home, in the interior provinces. Apparently, even the typical Chinese worker gets tired of the job scene in the industrialized cities. Wage pressures are also going up, as there is now a shortage of experienced labor...something many predicted would never happen in China. Viet Nam and Malaysia are now considered the SE Asian 'low wage' markets....hard to believe...

[oblivious]

6. Do you think there is any truth to this Wolfowitz statistic?

I find it almost impossible to believe since labour is only part of the cost. And coming from Wolfowitz, ...

from Text of remarks by World Bank President Paul Wolfowitz at the Corporate Council on Africa dinner

...And African labor costs are highly competitive: a shirt costs 12 cents to manufacture in Ghana less than half of 29 cents it costs in China. Madagascar, Mozambique, Kenya and Lesotho, could all produce the same shirt for under 20 cents.

http://allafrica.com/stories/200506250003.html

[Old and In the Way]

7. Problem with Africa, cheap labor is not the only consideration.

Infrastructure is probably more important. It takes a critical mass of educated people living in a society that can support a stable environment conducive to advanced manufacturing. I'm sure Africa can be cost effective in certain types of commodity manufacturing, such as textiles. I'm also sure they have a much lower labor rate to exploit. With obvious local exceptions, particularly South Africa, I don't think they have a significant class of capitalists and entreprenaurial types to coalesce around. Chinese have been capitalistists for thousands of years. Much of mainland China's development was financed by Hong Kong, Taiwanese, and Shanghai investors...not sure Africa now has a comparable class of people that can do this. Africa needs to import just about everything today and they have significant structural issues both inter- and intra- countries (communication technology, transportatuion, utilities, health services, trade/customs, language, etc) that have to be addressed before they can take the next step, IMHO.