LATEST INSIGHTS

Your Present Location :Home > LATEST INSIGHTS

Ding Gang: Shortage of cheap labor obstacle for US manufacturing revival

2016-12-22

By Ding Gang    Source: Global Times    Published: 2016-12-21


It`s been a fad to talk about rejuvenating the manufacturing industry, and regarding this topic people often pay more attention to factors such as tax, investment and labor price. But actually what is needed more is professional attitude - diligence, discipline and persistence.


Any Chinese person that stays in an American city or community just for a day or two will find that reinvigorating US manufacturing has been an impossible dream.


Chinese people have had more than three decades` first-hand experience with manufacturing. Americans who shop in the malls, idle about in the streets or enjoy life in the parks have nothing in common with the tens of thousands of Chinese migrant workers that swarm into the coastal cities of the country. Americans, in particular the generations aged under 40, are unlikely to work along assembly lines as their peers in China, Vietnam and Cambodia do.  


Having been deindustrialized for more than 20 years, how can the US find Americans who are willing to and have the skills to work in manufacturing? In fact, reinvigorating manufacturing goes against development norms somewhat since it wants laborers to again live laborious days and office workers to resume physical work.


Many countries restructure their economy by upgrading from manufacturing to services and advanced technologies. There seems to have been no precedent for working the other way. Robots may be an exception, but it still needs to comply with the regular pattern. When I went to work in the US for the first time in 2000, I bought white cotton socks at three pairs for $10. On the labels of the thickly-woven socks was printed "Made in USA."


Did the US produce such small cheap pieces? The question kept haunting me until I came across a report by the Wall Street Journal later, which said that nearly 90 percent of socks sold in the US were made in the country. Americans spent as much as $5 billion on socks every year. But how can such a big market be missed by sock producers in Latin America and Asia? Why didn`t American manufacturers move their factories to other countries?


The reason is that American sock producers are completely automated with computers in control. While they considered moving factories to places with cheaper labor, it`s no easy task to find highly skilled workers to manage the automation equipment.


Yet the US didn`t maintain its edge for long. With cheap labor, China soon started manufacturing machines like the US ones and trained technicians to operate them.  When I departed the US in 2003, I could buy six pairs of Chinese-made socks for $10. American manufacturing was being replaced by "Made in China."


There are still American-made products in the US, but they are mostly goods that can be directly produced by machines, such as toilet tissue. Last week, a friend of mine showed me a kitchen floor mat sold for $64 at Costco, which is made in the US. Yet the mat can be bought for around $10 in China. Americans can buy such made-in-the-US products to support domestic manufacturing, but their passion won`t last long.


Many producers of Chinese manufacturing may transfer their factories outside due to the hike in labor price, but they will hardly move to the US. The desirable choices will be countries like Vietnam, Myanmar and Cambodia.


Why these countries? Because young people there are still willing to work in the manufacturing industry. This applies to many other developing countries. A case in point is Brazil, where I worked. In Brazil, it`s hard to find many workers who want or are suitable to work in the manufacturing industry even with higher payment.


The author is a senior fellow with the Chongyang Institute for Financial Studies at Renmin University of China.

Key Words: US   manufacture   economy   Ding Gang  

Latest Insights