Posts Tagged ‘labor economics’

What’s $65 among friends?

February 28, 2012

There was a piece recently in  the NY Times — titled How the U.S. Lost Out on iPhone Work.

The article stirred up some flak against Apple for producing the iPhone in China instead of the U.S.

The author argues that lower Chinese wages are, at best, only a partial explanation:

It is hard to estimate how much more it would cost to build iPhones in the United States.

However, various academics and manufacturing analysts estimate that paying American wages would add up to $65 to each iPhone’s expense.

The article concludes: “However, labor is such a small part of technology manufacturing …and since Apple’s profits are often hundreds of dollars per phone, building domestically … would still give the company a healthy reward.”

What???

Apple sells about 100 million iPhones annual … times $65 is $6.5 billion.

So, the answer is for Apple to suck it up, lower its profits, and dish the dough to high cost American workers.

Or, maybe Apple could just jack up the price of each iPhone by $65.

Certainly folks would be willing to pay that much of a premium to get an American made phone that works almost as well as the Chinese made one, right?

I’ll take the under on that bet.

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The problem is that the market for unskilled labor is too efficient … say, what?

February 23, 2012

Punch line: Fmr. Labor Secretary Robert Reich says that the problem isn’t that there are too few manufacturing jobs in the U.S., it’s that unions don’t have the sway they used to have.

Excerpted from Salon; “The factory jobs aren’t coming back”

The U.S. has 5.5 million fewer factory jobs today than in July 2000 – and 12 million fewer than in 1990.

Blame that on lower-wage workers overseas … and  numerically-controlled machine tools and robotics. 

Not to worry, though, because bringing back American manufacturing isn’t the real challenge, anyway.

The real challenge is creating good jobs for the majority of Americans who lack four-year college degrees.

Manufacturing used to supply lots of these kind of jobs, but that was only because factory workers were represented by unions powerful enough to get high wages.

That’s no longer the case.

In the 1950s, more than a third of American workers were represented by a union.

Now, fewer than 7 percent of private-sector workers have a union behind them.

If there’s a single reason why the median wage has dropped dramatically for non-college workers over the past three and a half decades, it’s the decline of unions.

Let me make sure that I understand.

Folks who don’t finish college can’t compete with equally skilled (or unskilled) foreign workers who charge a lot less for their services.

And, they can’t compete with high tech machines that crank out consistent quality at low cost.

So, the answer is to introduce a market inefficiency — a labor cartel – that forces U.S. companies to pay unskilled laborers more than their true economic value.

And then, when the companies pass along the added costs to consumers …  we’re all some how better off.

Do I have it right?

Wouldn’t it make more sense for unskilled laborers to get paid their true economic value … and enhance their educational and skills’ bases if they want to be paid more?

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