By J.D. Neeson, President, Marine Parts Express
When I was working for a large manufacturing company in the 1980s, the dreaded juggernaut on the horizon was the Japanese. Everyone thought it would be only a matter of time before all manufacturing would end up on the Japanese shores, due to the Japanese’s relatively low labor rates and their adoption of new manufacturing techniques. What eventually happened, of course, was that all those Japanese workers began to enjoy having a little more money and began to want a little more.
Then, within five to seven years, there was a great move afoot to move manufacturing to South Korea, where the Koreans’ relatively low labor rates and their adoption of new manufacturing techniques made them the darlings of manufacturers.
So, I greeted the recent news regarding China’s concern over the number of companies that were moving to Vietnam, Myanmar, and Cambodia, with their relatively low labor rates and their adoption of new manufacturing techniques, with gentle pleasure and not-so-gentle satisfaction.
Apparently, wages in China have risen 158 percent over the last 10 years or so, and 11 percent in the last year alone. The Chinese have begun to try a number of what they call “adjustment strategies.” One strategy is to transition towards high-value, low-labor manufacturing (i.e. fewer workers and more robots), but what happens to all those workers that are displaced?
Currently, approximately 300 million of China’s 1.3 billion people are involved with manufacturing, or 23 percent of the population (the United States’ percentage is 3.5 percent), and they are unlikely to be happy campers. Just think how much excitement is generated in the U.S. on this issue and then multiply that by seven. (Incidentally, the total manufacturing output of the two countries is almost identical.)
Once workers have had a taste of the apple it is just about impossible to take it away from them. I bet the Chinese leadership lie awake nights thinking about what might happen if growth slows and unemployment increases and a whole bunch of people look toward Peking for answers.
On a side note, during the ’80s when all of us in the U.S. manufacturing world were frantically trying to imitate the Japanese, I always had the vision of a bunch of guys in Tokyo sitting around a big table discussing what they could make the foolish U.S. guys do. One might say something like, “Let’s convince them we all do jumping jacks every morning.” Another guy would say, “Oh, that’s good. I know, I know—let’s tell them we use little red cards for tracking.” And one of the other guys would say, “I have a cat called Kanban, so why don’t we call it that.” Then they all giggle and drink their sake.
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November 18, 2011 / JD Neeson / 2
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