BREAKING: Corporations Admit Trade Is About Lower Wages (Duh)

[Earth Bound Misfit]

Source: Working Life
http://workinglife.org/blogs/view_post.php?content_id=8152

by Jonathan Tasini
Wednesday 18 of June, 2008

I meant the "breaking" as a snark, in case it wasn't obvious. For everyone but the pro- so-called "free trade" crowd (economists, elites and too many Democrats), it's been crystal-clear that the driving force behind trade is wages, not efficiency, a better product, lower prices for consumers and all the other nonsense you read. Today, even some business people are admitting it, albeit, not intentionally.

The New York Times has a piece today that describes how companies are now fleeing China, or at least hedging their bets, because--get this--labor costs are TOO HIGH:

China remains the most popular destination for foreign industrial investment in the world, attracting almost $83 billion last year. But a growing number of multinational corporations are pursuing a strategy that companies and analysts call "China plus one," establishing or expanding Asian bases outside China, particularly in Vietnam.

A long list of concerns about China is feeding the trend: inflation, shortages of workers and energy, a strengthening currency, changing government policies, even the possibility of widespread civil unrest someday. But most important, wages in China are rising close to 25 percent a year in many industries, in dollar terms, and China is no longer such a bargain.

And if you can't keep wages down, well, let's just cut the number of workers:

"We will maintain our capacity in China, but we will make it more automatic and reduce the number of employees," said Laurence Shu, the chief financial officer of Shanghai-based Texhong, one of the world’s largest makers of cotton and spandex fabric....

What does the labor cost issue mean?:

In coastal provinces with ready access to ports, even unskilled workers now earn $120 a month for a 40-hour workweek,

--snip--

Got it. Imagine that: China labor is no longer a bargain. Chinese workers are putting in 48-hour workweeks (and we thought we worked too hard) and still earning less than $1 an hour--AND THAT COST IS GETTING TOO HIGH FOR CORPORATIONS.

NY TIMES piece:http://www.nytimes.com/2008/06/18/business/worldbusiness/18invest.html?_r=1&partner=rssuserland&emc=rss&pagewanted=all&oref=slogin
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[keep_it_real]

1. What is needed is a global, world wide minimum wage

Maybe set by the United Nations like the Non-Proliferation Treaty or the Kyoto Protocol; the world could use such in the area of wages.

[Earth Bound Misfit]

2. I recall Dick Gephardt tried to pitch that idea n/t

[Igel]

3. It would have one of two effects.

1. If it were low, it would trivially help balance of trade deficits and labor concerns in more developed countries at best.

2. If it were high enough to matter, the structural changes that would occur overnight in underdeveloped countries would be traumatic as everybody tried to raise prices: those who relied in savings would see them vanish in a burst of inflation, uneven price-raising patterns would produce a different distribution of impoverishment and wealth, and those unemployed would suddenly see whatever means they had of making money be essentially obliterated *or* they would suddenly be in demand as off-the-books labor.

A higher minimum would help more countries' labor forces, but would cause more countries to have economic shocks.

[Omaha Steve]

4. K&R

Been to busy tonight to read.