Here is a real world example i’m dealing with in my business.
I recently purchased a pallet of off-brand plastic wrap for resale at $0.59 per unit from a third party distributor in Minneapolis, MN.
I looked up the manufacturer of the product, their warehouse is located in a suburb of Chicago. However, the warehouse imports 100% of their product from China.
My question is, with all of the shipping involved, where in the world is the profit?
Manufacture in China --> ship to LA - -> Pay importing cost - -> Ship to Chicago - -> Ship to Minneapolis - -> Ship to me
And each party that is involved with it, still makes a profit somehow. It just boggles my mind.
Wouldn’t it be more lucrative to the Chicago company to purchase the manufacturing equipment in Chicago and cut out 4 steps of mark ups?
Apparently not. If it could be done cheaper here, it would be. As the cost of living rises in China, manufacturing will flow to a cheaper places, such as Vietnam or even Africa.
Will the US become the low cost provider of commodities in the future? I doubt it, unless Americans figure out a way to live on a few dollars a day.
Something I imagine that will happen in the not so distant future will be that the dollar in China will grow stronger at a much faster rate than the U.S. dollar. The number of consumers in China should also grow. I suspect this will push a fair share of manufacturing back into the United States. The indistrialization of China might turn into a huge source of growth for the world economy in general. Once that bubble pops who knows what will happen.
A major factor is the exchange rate of the American dollar. The American dollar is the most desired currency in the world and thus high-priced–and consequently American manufactured goods are high-priced.
Shipping charges are practically negligible per item when large quantities of them are moved. That’s the huge breakthrough of the past 50 years. Even before computers changed the world, shipping containers made a similar impact. Without shipping charges, then the initial cost of manufacturing is all that counts and countries with the cheapest labor force naturally have an advantage. I’m not sure what the OP meant by import fees. Most items are not subject to tariffs in an age of free trade.
Just because cheap labor confers an advantage doesn’t mean that other factors can’t become important. Quality of materials, expertise of work force, quality control in manufacturing, percent of defects, return policies, relative value of currency, and bunches of even more specialized factors come into play. Social factors have become more important - customers hate when companies buy from manufacturers who place them employees in danger and exploit them in other ways. Look at the backlash against clothing companies whose factories in Bangladesh burn while the employees are locked inside. (Shades of the Triangle Shirtwaist Factory Fire in 1911!)
It’s possible that the vast majority of all the low-wage minimum-skill manufacturing that can have been moved out of the U.S. already has been. Some manufacturing is beginning to move back to the U.S. so that quality is better and better controlled. Future competition may be tilted toward complex high-end products that the U.S. has always been excellent in.
It’s hard to imagine a good future scenario in which low-end plastic wrap is made in the U.S.; that probably requires a collapse of the economy that does no one any good. It’s hard to imagine any scenario in which manufacturing becomes as dominant as it once was. Too many other countries can compete today. China has been losing factories to cheaper Asian countries for the last decade as Chinese wages increase. If China can’t compete on wages, the U.S. should never want to try. Competing on everything else can be successful, and has proved to be in many industries. IMO, we’ve hit the low and begun to move up already. “Up” is always relative. The past won’t return, Pittsburgh and Detroit won’t live off steel, rubber isn’t go to save Akron. Tens of millions will be job-dislocated. It’s just better than the alternatives would be.
One thing though; much of the manufacturing remaining in the US is highly automated with very little labor involved. So even if a company brings manufacturing back to the US, they’re not employing as many people as in previous decades.
Yes, the entire world is moving to a point at which manufacturers and service providers will not need large numbers of employees. The question isn’t whether manufacture of cheap consumer products will move back to the US. The question is how does a society work in which consumers don’t have jobs.
This is when the standard of living for the human race will really begain to elevate itself. Much more time for creative thinking and doing. Our hours in a work week will simply have to be cut. Possibly extended vacations will be built into jobs allowing for travel and re-education and training etc.
That will require a full scale restructuring of our society and economic system. Who is going to make employers pay full salaries to people who work a few hours a week? And until that happens what will we do with massive permanent unemployment?
Once the U.S. dollar has slightly downgraded from where it is now you might start to see hours begain to be cut. Once China becaomes a full fledged consumer nation the dynamics of economics as we know them today will radicaly start changing.
I recently bought a sled and miter for my table saw from a company called Incra Precision Tools. Designed and built in the USA, and I can tell you that it was a genuine pleasure to receive and use something so excellent on both counts. Even the manual was written in plain English and easy to follow. Sadly, it seems to be one of the few, unless one buys from small manufacturers and pays a large premium.
Until we are willing to pay a premium for USA-made wares, manufacturing of durable goods in this country will be at a disadvantage.
Predatory practices, such as ‘dumping’, are being actively utilized by some countries in order to hasten the demise of our manufacturing sector. The steel industry is but one sector feeling the pressure from such forces.
These overseas ‘competitors’ are often state-subsidized, and therefore are not on a level playing field with open-market private industry.
Those in charge, who are beholden to shareholders and quarterly P&L statements, are not in a position to counter the long game being played by those who would see us fall.
Isn’t there still a significant difference between that kind of manufacturing and skilled manufacturing, and isn’t skilled manufacturing the kind of manufacturing that tends to remain in the U.S.–in fact, it must be the kind of manufacturing mentioned in the quote by SmartAlecCat, (that would draw an average wage more than the average school teacher)?
My understanding is that skilled manufacturing could become (more) “viable,” but they’re having a problem getting enough people with the necessary skills. So really, it’s a question of retooling the educational system, as much as anything else.
I’ll admit that I’m baffled by this. First, an actual fact: The Chinese Yuan has been rising against the dollar pretty steadily since 2010. Hours have not been cut; there isn’t the slightest evidence that they are going to be cut. Who would do that and why? What sense would it make?
The rest of your posts sound like a parody of what people were saying about the Future starting in the 1920s. It never happened and it never will happen. Creative people like their work - the tendency is for them to work longer hours. Non-creative people get little from extra leisure time, especially since leisure is so expensive these days. How do they afford this without jobs?
Economics will not radically change - it/they will be reinforced. The world of the Future will be like today only more so.
I’m a millwright and if the numerous phone calls that I get from recruiters are any indication (not that I’m looking at the moment) advanced manufacturing in the US is doing just fine.
Perhaps the low-end items are being done in China and Mexico, but the complex assemblies are still created here in the US.
Serious answer to the OP, when automation improves to the point that extra employee costs and extra regulatory/environmental are dwarfed by shipping costs. For some industries that probably isn’t that far away, or is already here. For other industries the costs of doing it right due to environmental issues might mean never, unless the other countries manufacturing the stuff now pass and enforce new laws. For all industries a shift in energy prices higher will probably help make manufacturing somewhat more local over the very long term (next 50-100 years). Of course if we find a way to make energy cheaper, just the opposite.
As has been said, it depends what you mean by manufacturing:
Low end consumer products, such as is sold in Wal-Mart? Almost none is made in the USA.
High end technical products, such as sophisticated medical devices and precision tools? Lots is made in the USA.
The average person buys lots of the former and almost none of the latter, which is why so many people think manufacturing is dead here. But those technical products are very valuable.