Tuesday, December 3, 2013

Jobs now Outsourced from China to Cambodia

Motley Fool: "Made in China. It's a slogan emblematic of many things -- of cheap labor, the loss of U.S. manufacturing jobs to low-wage nations, and China's rapid ascent to the ranks of the largest economies on Earth."

The United States has been the world’s largest economy since 1871, but that top ranking is now under threat from China. The Asian giant has achieved economic growth averaging 10% since it initiated market reforms in 1978 and, in the process, lifting almost half of its 1.3 billion population out of poverty and becoming the undisputed second-largest economy (after having recently surpassed Japan).

China's GDP was forecast by the OECD to exceed the GDP forecast for the U.S. for the very first time. The Chinese economy is estimated to be 1.5 times as large as the U.S. by 2030. The IMF reached a similar conclusion in its October 2012 World Economic Outlook report, projecting that China’s GDP would exceed the U.S. GDP for the very first time by 2017.

Washington's Economic Policy Institute projected that just between 2001 and 2011, about 3 million jobs fled the U.S. for China, fueling a renaissance in cheap products in American stores, but also sending America's trade deficit skyrocketing.

But the offshoring of jobs has been going on for the past 40 years. And that doesn't even include the multiplier effect when considering the additional jobs lost. Unlike manufacturing, jobs in the service industries (that have now become dominate in the US) have much less of multiplier effect.

But now China's jobs boom may be short-lived. Minimum wages are rising, workers are demanding higher labor standards, and a rising middle class has turned from cheap manufacturing jobs to employment in the service sector (just as it happened in the US).

And just as in the US, technology has replaced some of China's cheap labor, but many more jobs and companies have outsourced from the nation that was once the very king of outsourcing itself.

Double-digit wage increases in China and a shortage of labor for factory work have prompted several companies to move from China to Cambodia, Vietnam, Bangladesh, Indonesia, Thailand, and other cheaper countries. (Many American companies already have manufacturing in these other countries).

Our "job creators" haven't been creating jobs in America. Just as the Pope had debunked the myth of "trickle down" economics, in an article for Business Insider, a rich investor and entrepreneur named Nick Hanauer also explains very thoroughly (but simply) why the rich don't create jobs, debunking the "job creator" myth as well. (And not only do they offshore jobs, they avoid taxes and hoard their profits as well.)

PoliticusUSA.com: "The old but obviously bought and paid for lie is American manufacturing left the United States because of the government, taxes and regulations. If that’s the case, Republicans need to explain the latest exodus of manufacturing from China to other lower wage countries in Asia."

Cambodia, a country of just 15 million, is seeing its economy transformed by the influx of new factories that are sprouting up around its capital and near the Thai border.

The general manager of a Taiwanese company with a 4,000-employee factory in Cambodia near Vietnam, quips: "So many foreign companies are competing for workers, we wish the population [in Cambodia] would double." He estimates that factory wages have risen to $110 to $130 a month, compared with $85 to $100 three years ago. However, that is still less than China’s factory wages of $400 a month. Wages in Cambodia are roughly a third of those in China. (Read more at the Washington Post)

PoliticusUSA.com: "These corporations loathe the middle class. The only people allowed to make a decent living are executives. If you’re a blue collar middle-class factory worker, you are just a leach on the back of profits. Just as the Chinese working class was beginning to make a living, many others will do exactly what they did to the United States 30 years ago; slide the run from underneath them."

And when wages get too high in Cambodia, Vietnam, Bangladesh, Indonesia, Thailand, and other cheaper countries, maybe they'll move to Africa as the next "emerging market".

Virgil Bierschwale at www.KeepAmericaAtWork.com has one solution:

  1. It is OK to grow, raise or manufacture your products here in America and sell them to other countries (and the same applies to those countries).
  2. It is OK to open retail or manufacturing branches in other countries to offset the shipping problems as long as you hire the locals to work in those countries.
  3. It is NOT OK to put the people in your country out of work, send the growing, raising or manufacturing to another country and then import those products back into your country.

Maybe if the people of the world also had an International Minimum and Maximum wage, and an International Corporate Tax, that might help too --- such as a Global Income Tax.

But until then, maybe within the next 50 years (if human labor isn't completely replaced by computers, automation and robots), America will become the new "emerging market" --- as it once was in 1492.

Meanwhile, with an ever lower "labor force participation rate", an increase in low-paying jobs in the service and retail industries, and low tax rates for the super-rich and large corporations, expect more cities to go bankrupt, higher trade deficits, more pension funds to go defunct, and more cuts in government spending --- and then sit back and watch, as America descends further into decline.


  1. Dean Baker Reminds Us

    "The United States is still down almost 9 million jobs from its trend path. We are losing close to $1 trillion a year in potential output, with cumulative losses to date approaching $5 trillion. Many older workers lost their jobs with little hope of ever finding another one, even though they are ill-prepared for retirement. Young people getting out of school are facing the worst job market since the Great Depression, while buried in student loan debt. These numbers correspond to millions of dreams ruined."


  2. Update:

    The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. "His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade," the CEO recalled.