On Thu, 3 Apr 2008 12:04:15 -0400, "Ed Huntress"
wrote:


"F. George McDuffee" wrote in message
.. .
On Thu, 3 Apr 2008 07:13:09 -0400, "Ed Huntress"
wrote:
snip
Having covered this topic for some decades as a magazine reporter, I can
tell you that the US was the cheapest place to produce advanced machine
tools, for example, as far back as the early '90s. It's also been the
cheapest place to produce top-tier cars (ones that meet Western quality
standards) for about the same length of time. (Korea probably holds that
title now.) That's because we have the most productive manufacturing
economy
in the world. As of five years ago (I haven't checked current figures), we
were roughly ten times as productive as China, for example.
snip
====================
Thanks for verifying data I had collected on the micro level some
time back [early to mid 90s], at several companies/divisions
making truck/automotive components. I thought that what I
observed and heard in the staff meetings was an isolated
aberration.

As incredible as it may seem, it appears that much of the job
outsourcing/off-shoring was not so much to save money as efforts
by "management" to "get back at" their workers [in my three
cases, 1 union and 2 non-union shops] for making too much money,
for causing problems by filing wage/OT and discrimination claims,
etc.

I suspect this varies by industry and perhaps by company, George. It's clear
that many of the offshoring operations are intended to save money -- often
lots of money -- by using cheap labor, low embedded supply costs, and a
freewheeling, largely uncontrolled attitude towards environmental costs.

To say that China has 1/10 the productivity as the US means that they use 10
times as many labor hours to produce a given value of product. This is
partly a legacy of the outrageous practices of the state-run businesses that
preceded the current crop of private ones; one way to keep unemployment down
is to hire 10 times as many people as you need, and that seems to have been
the pattern. The tradition dies hard. And, of course, low labor costs and a
legacy of poor capital development has left China with an overhang of poor
productivity. Productivity, first, depends on having productive machinery
and equipment. Finally, their productivity figure suffers because the output
is measured in dollars of goods or services sold. They make cheaper
products, so they wind up with a lower productivity figure.

But even with 10 times as much labor used for each dollar value of output,
total production costs in China are still extremely low. We talk about that
$0.80/hour wage -- I contributed to selecting that average in a series of
articles I wrote around five years ago -- but the fact is that
shoe-assemblers in China's interior were then making $0.17/hour. And the
official minimum wage, widely ignored, was then (2003) $0.32/hour.

Some of the early offshoring was a product of companies not wanting to miss
the ship that everyone thought was sailing for good. So there was an
overexuberance of offshoring, some of which has been pulled back.
Nonetheless, China remains the low-cost producer. Their costs are climbing
fast but so is their productivity.

I asked the owner of a company with head office in HK (costs 10x that
of China, more expensive than most of the US) how the productivity of
his China workers (factory near Shanghai) compared with HK workers. He
said it was *higher*-- in terms of parts per hour, not dollars per
hour. That's the equation for a business owner looking to outsource,
not the macroeconomic numbers.
Best regards,
Spehro Pefhany
--
"it's the network..." "The Journey is the reward"
Info for manufacturers: http://www.trexon.com
Embedded software/hardware/analog Info for designers: http://www.speff.com