If one has been taking snapshots of consumer prices in China's major cities, one would find high inflation over the last 5 years or so. In many places, one can find examples in which prices, e.g. certain food, has gone up by 50%. That's inflation. It's not quite true that "government controls most things", but one should also note that government intervention in certain areas is a common method of preventing social unrest and administer some form of equity. And it has plus and minus like most policies. Even the US instituted some pricing control in 1971. It certainly doesn't mean that China will always be advantaged because of this control.
While labor cost is important factor in competitiveness, it's not the only factor. US has long lost most of the labor-intensive, low pay industries, and we have long been moving up to food chain of knowledge-based workforce. In the short term, that will be the differentiation between the US and China. So while the media trumpets the manufacturing job loss to China, note that it's not the biggest part of our economy. On the other hand, we should consider the following: 1) so our labor cost lowers, does it mean it's lower than other countries? Like the other person pointed out, China labor cost is also rising, so likely China will experience some job loss to other emerging countries. 2) Germany has one of the highest labor cost in Europe, but it also has the strongest. Why? Because of their higher productivity and value contribution by their labor market, and it's not because they have the lowest cost manufacturing like China.
Absolutely! The labor cost has been the bane of the West. No nation can be competitive if the cost of living arbitrarily rises sharply and the labor cost subsequently matches the high cost of living. The rise in labor cost in China will likely never match that of the West because of the government control on most things in China so the West will always be at a disadvantage especially in the US where citizens never want government in their business.
I don't think they will quite be on the same level but if the innovation quality lags from either side, the shift will most likely be related to that and not necessarily cost. Managers have the task of custting costs so that will always be a major factor when it comes to procurement of services.
Western labor costs may not be declining but they are definitely not rising. In the meantime, Chinese labor costs are on the rise and they will continue to march higher. These two developments will eventually lead to a situation where Western labor costs won't be as prohibitive in future as they are today. Does that mean Western costs willll match Chinese labor costs soon? I don't think so but they may weaken enough to make some executives review their overall costs and decide the savings may not be worth the headache.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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