Wednesday, September 15, 2010

Chinese Cost Of Labor - Let's Just Round It To Zero


When you have 1.6 billion people in your nation, the idea of labor unions forming is a bit far-fetched.  Even with a red-hot economy, there are more people available for jobs than jobs available.  Do you want to go on strike?  Bye-bye.  Still, the news trumpets rising wages in China.

The shift was illustrated Sunday, when Foxconn Technology, one of the world’s largest contract electronics manufacturers and the maker of well-known products that include Apple iPhones and Dell computer parts, said that it was planning to double the salaries of many of its 800,000 workers in China, beginning in October. The new monthly average would be 2,000 renminbi — about $300, at current exchange rates. [full story]
Let's repeat that: $300 per month... not per week; not per day.  Divide that $300 by the typical U.S. 160 hours per month and you get less than $2 per hour.  A U.S. worker will get that in one day with a couple hours of overtime included.  That's roughly 1% of an executive's pay.  You'd get shut down by the U.S. government in about 27 seconds with that situation in Biloxi.

So, if that Apple iPhone has 5 hours of labor to make, that's about $10 of labor cost [in 2009, the total manufacturing cost was estimated at $6.50 for an iPhone 3GS].  It seems the "Workers' Paradise" has some really poor rewards for the workers.  In fact, let's call it what it is... slavery. Yes, "the Chinese" are making money... the elites, the powerful, the manipulators... who work hand in glove with our "free traders" who are also doing quite well, thank you.
... the factory only hires workers in their twenties. He was hired without issue. He signed only one special document: An overtime working agreement that says the company is not responsible for their long hours of working. According to Liu, this voluntary agreement overrules Chinese state regulation. [read the "slavery" link above]
"Voluntary" ... the key word in all libertarian arguments to justify any manner of commerce.

Hey, those workers don't have to go into the factories... they do it voluntarily [anonymous libertarian]. Right... they can work hard labor in the mines [picture source] or rice fields for less.
Our economists will say the Chinese are subsidizing us... as the Chinese undermine our domestic manufacturing and social structure by eliminating jobs at virtually every point from engineering to manufacturing.   
Class warfare?  Hardly, this is economic domination and evisceration using conditions and pay that are completely illegal in the U.S.  The good news is that your unemployment checks go farther if you buy Chinese made products.  The bad news is that your unemployment checks will run out, your home won't be sold, and you can't get out of the student loans you used to get the degree that can't get you a job.
You don't have to be a left-winger to see that the U.S. feng shui is quite bad.  But, hey, we still have the "free market" for those who don't get bothered by details like those described above.



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There is always an easy solution to every human problem—neat, plausible, and wrong.
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“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
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Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)