Cost of Manufacturing is relative. The China model.

[GSLevel9]

So American companies buy widgets from China for $1. Since duties are so low they land the widget in their warehouse for $1.10

The American company wholesales the widget for $2, and another step or two down the retail chain it sells to consumers for $7.

The same widget can be built in the US for $4 but it will be priced out of the market because $2 is the going rate for a wholesale widget.

How can China make a widget for $1? They build an infrastructure based on the concept of mass manufacturing. They pay minimal wages and expect a lot from their employees.

So are these Chinese employees poor? Depends on what you mean. They have food and basic necessities of life. How do they do this on such low wages? Cost of living.



Why does the American Widget Manufacturer charge $4 for a widget? Well... because they must pay their employees a living wage, provide benefits and taxes and make a profit.

What are the options?

1) Raise import duties to equalize prices. Bad news is that if you increase the price of a widget to $4 it will sell at the retail level for $20 and no one would ever pay $20 for a widget.

2) Make the American manufacturer more competitive. If the manufacturer could sell the widget for $1.50 they could take business AWAY from China. Bad news is... they'd pay their employees less and offer fewer benefits and make less profit for their owners.

In post WW2 US, families worked for a relatively low wage but did OK because the cost of living was low. Many people don't realize... not everyone CAN earn 75K per year. Some people don't produce a PRODUCT (their labor) worth 75K per year. Maybe the guy in the auto factory who holds the pneumatic wrench tightening car wheel lugs produces a product worth $30K per year.

You want manufacturing to come back to the US... lower the cost of US made goods. But figure out a way that people can LIVE on reduced wages.

How about some crazy theories like "Factory Cities"? That's the concept in use in many countries where a factory or series of factories are so closely tied into an areas infrastructure they can lower the cost of goods and housing and transportation to employees?

[Romulox]

1. How about company housing, and a company store????

Unrec.

[GSLevel9]

2. then what's the answer? nt

[FreakinDJ]

3. Us missed some important points

China uses a Value Added Tax on those products they export as opposed to Income Taxes.

So WE the consumer pay for ALL their infrastructure and the 25% Oil Subsidies. Which in turn further drives down USA economy and GDP

[GSLevel9]

5. all the more reason to move reasonable mfg back to the US. nt

[Hannah Bell]

4. yeah, company town. great idea whose time has come.

[GSLevel9]

6. not in a turn of the century sorta' model...

[Romulox]

9. Kinder? Gentler?

:rofl:

[jobendorfer]

7. an important point about the postwar era

... is that the industrial infrastruture of Japan, China, Western Europe, and the Soviet Union was -- in 1945 -- a pile of smouldering rubble.
Leaving U.S. industry as the about the only game going. Europe, Japan, and China recovered of course, but that many years.

J.

[Romulox]

8. That old saw hardly tells the story of the last 30 years though.

In which the US has "enjoyed" flat wages while the Euros and Japanese, rubble long behind them, prospered. :hi:

[PA Democrat]

10. There are other factors to consider

such as the fact that China keeps the yen artificially low to boost its exports while suppressing imports from other countries.

Also, we need to reform health care in order to compete internationally. The cost of goods manufactured in the US are inflated because of the for-profit heath care system inflates the cost of workers' benefits.

[GSLevel9]

11. that's right!

The point I'm trying to make is...

if it takes $50,000 to keep your family of 4 happy and healthy... would you work for $30,000 per year if you could IMPROVE your quality of life?

Housing is inflated badly. The average house should be $70K nationwide and the average mortgage payment should be $300/mo. Should a new Toyota Camry-like midsize sedan cost $28,000?

How about abolishing all consumer non-housing credit? If people can't AFFORD TO PAY CASH for a $2000 55" LCD Tv... you'll start seeing $800 models on the market.

[PA Democrat]

14. I am not advocating what you seem to think.

I am simply pointing out the factors which make Chinese goods cheaper that have nothing to do with salaries of American workers.

[WatsonT]

16. Japan did much the same thing

place tariffs on imports and suppress domestic consumption to promote a positive trade balance.

It works great, for a while. Eventually people want to see more benefits for their labor so that swings back towards domestic consumption and feeding a growing standard of living. After a while exports drop off relative to imports and China is simply another (albeit very large) economy, rather than one growing at an insane rate.

[Liberal_in_LA]

12. doesn't the manufactuer of that widget cause a lot of pollution in China Also?

[GSLevel9]

13. of course it does.

but that's not going to change for the next CENTURY or so... China is clearly the greatest environmental offender ever.

[pampango]

19. China is the worst environmental offender, but we are much worse per capita.

The average Chinese has 1/3 the carbon output as the average American, but they have 4 times our population. The "greatest environmental offender" deserves two awards: one for the country - China; one for the individual - the American.

If China got divided up into 4 US-sized countries, China A, B, C and D would each produce one-third of the pollution produced by the US, even though each "China" would have the same population as the US.

[Romulox]

22. The "per capita" argument is bogus--having numerous children is itself an environmentall devastating

choice.

If I purchase an SUV, and you have 3 or 4 children, it is YOU who have made the decision which is worst for the environment.

[WatsonT]

15. I think we need to consider if we want these jobs back

Should we really be vying for assembly line jobs making cheap (mostly poisonous) toys?

It's like when the Japanese came to dominate in electronics. Yeah we lost out there, but we get cheaper electronics from them and we're able to focus on other things.

I don't think we can reasonably out-sweatshop the rest of the world, or even China specifically.

I would encourage people to maybe spend a little more when they can to buy American, although I wouldn't force it on anyone. And I'd support tax incentives, loans, etc to promote certain key areas of the economy (energy, transportation, communication) that benefit most every sector to promote American businesses.

But I don't think our future lies with cheap manufacturing. We still mass produce a lot of stuff, it's just usually not the things you have day to day contact with. So we're making ships, and planes, and heavy equipment and highly specialized medical and scientific gear, but not plates, t-shirts, and BB guns. That is a good basis for manufacturing. We should expand on that, and place even greater emphasis on an advanced economy: information services, software, bio-tech, medical technology, advanced engineering/manufacturing, aero-space etc.

[GSLevel9]

18. good point.

My family owns a business.

We are in the rare minority of Americans who actually exports products to China in addition to our imports.

We recently planned on making a product in the US to compete with other similar products that are made in China.

We soon discovered it is IMPOSSIBLE.

An example:

We were working with machine shops. The American machine shop btw actually had inferior equipment to the Chinese machine shop (New German made CNC).

The American shop insisted on charging us for "inches" of product made. We needed a simple shaped part cut from a sheet of PVC. And we wanted 800 little parts cut from every sheet. You program ONE little part into the CNC computer and then the machine calculates how to fit a lot of them on the sheet. You spend 30 minutes programming the CNC, you put a sheet of PVC on the table, clamp it down and flip a switch. Go grab a ham sandwich out of the refrigerator, drink a Coke and come back in 1 hour. The job will be done and you have 800 parts lying on the table.

They wanted $2500 for the parts in addition to the cost of the sheet AND they wanted to charge us $175 for the CNC programming fee. End cost for the parts was about $3000.



Later that year we ordered the same set of the parts from the Chinese mfg for $600.

American manufacturing is killing itself.

[Romulox]

23. Your number. It was easily gotten.

"Later that year we ordered the same set of the parts from the Chinese mfg for $600."

Just another "progressive" race to the bottom advocate, huh? :eyes:

[WatsonT]

25. Yeah I don't know what the answer is

but I do think that pining for the good old days won't help.

Our economy has to be dynamic to survive. And unfortunately that means at times entire industries will go under.


The goal should be to find better jobs to replace those lost.

[MineralMan]

17. Sounds simple, huh?

Trouble is that it's not all that simple at all.

There's much in your tale that is incorrect, to begin with. Then, you suggest something that goes against everything we've fought to get away from in this country.

I don't think so.

[GSLevel9]

20. as I used the word "crazy"

I'm not supporting company towns.

But give me an alternative to the status quo.

We CANNOT be a nation of people expecting white collar $100K per year jobs. The math DOESN'T add up. We need a VIGOROUS MFG base.

[MineralMan]

21. Well, of course. But it's not so simple to actually do.

I don't have an answer, though. It seems like nobody does, really.

[Juche]

24. There are tons of ways to make the US more competitive w/o lowering our standard of living

I'm not even an economist or business professional. I'm sure they know of more

1. Make health care more efficient. A large % of health care costs (corporate taxes for medicaid, half of Medicare taxes, employee health care) falls on corporations. Plus our health care costs are 1.5-2x higher than other OECD nations for inferior care. If our health care system was as well run as what you find in mainland europe that would save corporations thousands per employee. GM supposedly spent $1500 per car on health care, no idea if that is still the case.

2. Make China stop manipulating their currency to make it lower than it should be. Easier said than done, but that would help.

3. Promote labor and environmental standards abroad, it will raise the cost of production in other nations while also doing less indirect GDP damge. Include the cost of environmental degradation or worker injury rates into the cost of doing business rather than let companies push those expenses onto the public in foreign nations. In China, business costs less but the water is polluted. The cost savings business makes are made up for by higher expenses by the public to get water (as an example). China supposedly loses as much GDP due to environmental damage as they gain by growth.

4. Allow for more international trade union organization, let sister unions across nations strike together.

5. Our tax system supposedly puts us at a disadvantage (I can't remember how. I'm not an economist. But it has to do with things like the VAT, or tax incentives for outsourcing, etc).


You can do those things and still have a good standard of living.

Also labor isn't always that big an expense in manufacturing. It can be, but it isn't always. It used to cost something like $0.90 to make enough steel in China that would cost you $1 in the US. When oil was $150 a barrel it cost more to make and ship the steel overseas than to make it domestically.

Anyway, I hope something is figured out. Our current system is a race to the bottom. A hollowing out of the western middle class combined with severe environmental pollution in other nations.

[WatsonT]

26. Make china?

That sounds difficult. We have few ways to pressure them.

3 just won't happen, developing nations would see it as simply a way to keep developed nations on top and themselves at the bottom.

4 nothing is stopping that now.

5 you'll need to be more specific.

And labor is a huge portion of any industries expenses.