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I wouldn't conclude too much about the steady-state price of manufacturing labor based on the present global market. At the moment regional differences in the

I wouldn't conclude too much about the steady-state price of manufacturing labor based on the present global market. At the moment regional differences in the price of manufacturing labor are so large that corporations are basically labor market arbitrageurs. But arbitrage opportunities are by their nature kind of ephemeral, ending when the relevant markets stop mis-pricing things. Your POV seems to be that labor is correctly priced in the current cheapest labor market (the "Race to the Bottom" hypothesis) but I don't know that this is automatically true. It's at least possible that one can only arbitrage the price of labor in developing markets for so long until they develop and drive up the local price of labor, and until they are all developed. "The Jobs Ain't Comin' Back" is an appealing position for professional automators like us, because it lays the credit for manufacturing labor market dynamics at our own self-important feet, when in actuality it's shaped largely by brutally exploitative and probably transient (on the scale of decades, though) labor-price arbitrage. In particular the current manufacturing labor market artificially rewards centralization because the profit made by labor-price arbitrage is so large compared to shipping costs. I don't think it's a foregone conclusion that manufacturing is either Sweatshops or Robots in the long run.

zozbot234 6y ago
The "Race to the bottom" will be ongoing for a long time. The nice thing about manufacturing for a middle-income economy is precisely its role as a stepping point to far higher productivity in services and high-skill sectors - this means that many developing economies will naturally tend to become manufacturing-intensive over time, even beyond the East- and South-East Asian countries that most observers focus on at the moment. The U.S. is supposed to be well beyond that point already.
- bluGill 6y ago
  Problem is most people are past that. China and India do have a few more poor people to take cheap low skill jobs, but overall cost of labor is going up in both countries and manufacturers are starting to look elsewhere. Problem is that elsewhere is countries with much less population so they will run out. It probably won't be in my lifetime, but my kids need to plan for the day when there isn't a cheap labor source waiting to tap. It will be a good problem to have (think about all the engineers making life better), but it will be a problem.
  - StillBored 6y ago
    I think its a bit like a game of hot potato, where the final manufacturing location will basically end up being a global power house for the next couple centuries. Which at the moment looks to be china, despite textiles trying to move to lower cost countries, the magnetic force of ongoing factory automation in china might pull them back. The US deindustrilized to early for any of these really to come back without some seriously focused "billionaire" class investors putting their money first (aka Musk).
    - bluGill 6y ago
      How much can we learn from each other? I work at a factory making things, we have locations around the world because our final products don't fit in a shipping container so local factories out compete global ones. That means that we have manufacturing experts scattered all over the world. We buy parts from all over and share knowledge. (expect China, we are careful what gets shared with China)
  - jdsully 6y ago
    Spending on external training is $83bln [1]. Internal training program spend is an order of magnitude higher. Let alone salaries. That is a lot of spending that could be transitioned to robotics if humans become too costly. 1: https://trainingmag.com/trgmag-article/2019-training-industry-report/ https://trainingmag.com/trgmag-article/2019-training-industr...
phone8675309 6y ago
> It's at least possible that one can only arbitrage the price of labor in developing markets for so long until they develop and drive up the local price of labor, and until they are all developed. This is a fairly optimistic point of view, IMO. What I think is much more likely to happen is the following cycle: 1. Manufacturing comes to a new place due to low wages (relative to the cost of labor in the previous place), lax environmental regulations, low tax rate for corporate profits, and very low worker safety regulations. 2. This goes well for 20-40 years, but as things typically do, environmental regulations are put into place by the local government, the tax rate rises to pay for the externalities of the low wages, and workers organize, agitate, and win higher wages, more safety regulations, and worker protections. All of this raises the cost of labor. 3. Manufacturers move to a new location because it is much cheaper. This causes people in the old location to lose their jobs, become impoverished, and craters their economy to the point where the government, implored by all of these laid off and angry workers, need to do something to help the situation. This results in a lowering of wages, rolling back of environmental regulations, lowering the corporate tax rate, and repeal of the safety regulations and worker protections. 4. Twenty years later the manufacturers come back to the country because people have become so desperate for jobs that moving back to the country is relatively cheaper compared to the country that manufacturing just moved to. Just view the policy decisions with respect to manufacturing that the leaders of the United States and Mexico have proposed to "bring back" these blue collar jobs. It all follows this playbook.
- neutronicus 6y ago
  If things are better than before after step 4 you still have damped oscillation. I think the distillation of your hypothesis is this: labor (and environmental externality) markets change slowly enough relative to the amortization schedule of a factory that perpetual arbitrage between them is possible. To the extent that this is true, one cause is that governments (with the notable exception of China) handicap themselves by honoring agreements, which they absolutely do not have to do absent a bigger, badder government to make them. A savvy, Machiavellian US government policy would: 1. Promise corporations the world 2. When factories are built, expensive machinery shipped in, and personnel trained, renege and hike taxes, but not so much as to force a write-off 3. When foreign governments make it difficult for US corporations to operate factories abroad and they ask for diplomatic support, shrug and tell them play stupid games, win stupid prizes 4. Do not apply the above policy for US corporations doing natural resource extraction abroad. (i.e. act more like China)

zozbot234 6y ago

The "Race to the bottom" will be ongoing for a long time. The nice thing about manufacturing for a middle-income economy is precisely its role as a stepping point to far higher productivity in services and high-skill sectors - this means that many developing economies will naturally tend to become manufacturing-intensive over time, even beyond the East- and South-East Asian countries that most observers focus on at the moment. The U.S. is supposed to be well beyond that point already.

bluGill 6y ago
Problem is most people are past that. China and India do have a few more poor people to take cheap low skill jobs, but overall cost of labor is going up in both countries and manufacturers are starting to look elsewhere. Problem is that elsewhere is countries with much less population so they will run out. It probably won't be in my lifetime, but my kids need to plan for the day when there isn't a cheap labor source waiting to tap. It will be a good problem to have (think about all the engineers making life better), but it will be a problem.
- StillBored 6y ago
  I think its a bit like a game of hot potato, where the final manufacturing location will basically end up being a global power house for the next couple centuries. Which at the moment looks to be china, despite textiles trying to move to lower cost countries, the magnetic force of ongoing factory automation in china might pull them back. The US deindustrilized to early for any of these really to come back without some seriously focused "billionaire" class investors putting their money first (aka Musk).
  - bluGill 6y ago
    How much can we learn from each other? I work at a factory making things, we have locations around the world because our final products don't fit in a shipping container so local factories out compete global ones. That means that we have manufacturing experts scattered all over the world. We buy parts from all over and share knowledge. (expect China, we are careful what gets shared with China)
- jdsully 6y ago
  Spending on external training is $83bln [1]. Internal training program spend is an order of magnitude higher. Let alone salaries. That is a lot of spending that could be transitioned to robotics if humans become too costly. 1: https://trainingmag.com/trgmag-article/2019-training-industry-report/ https://trainingmag.com/trgmag-article/2019-training-industr...

phone8675309 6y ago

> It's at least possible that one can only arbitrage the price of labor in developing markets for so long until they develop and drive up the local price of labor, and until they are all developed. This is a fairly optimistic point of view, IMO. What I think is much more likely to happen is the following cycle: 1. Manufacturing comes to a new place due to low wages (relative to the cost of labor in the previous place), lax environmental regulations, low tax rate for corporate profits, and very low worker safety regulations. 2. This goes well for 20-40 years, but as things typically do, environmental regulations are put into place by the local government, the tax rate rises to pay for the externalities of the low wages, and workers organize, agitate, and win higher wages, more safety regulations, and worker protections. All of this raises the cost of labor. 3. Manufacturers move to a new location because it is much cheaper. This causes people in the old location to lose their jobs, become impoverished, and craters their economy to the point where the government, implored by all of these laid off and angry workers, need to do something to help the situation. This results in a lowering of wages, rolling back of environmental regulations, lowering the corporate tax rate, and repeal of the safety regulations and worker protections. 4. Twenty years later the manufacturers come back to the country because people have become so desperate for jobs that moving back to the country is relatively cheaper compared to the country that manufacturing just moved to. Just view the policy decisions with respect to manufacturing that the leaders of the United States and Mexico have proposed to "bring back" these blue collar jobs. It all follows this playbook.

neutronicus 6y ago
If things are better than before after step 4 you still have damped oscillation. I think the distillation of your hypothesis is this: labor (and environmental externality) markets change slowly enough relative to the amortization schedule of a factory that perpetual arbitrage between them is possible. To the extent that this is true, one cause is that governments (with the notable exception of China) handicap themselves by honoring agreements, which they absolutely do not have to do absent a bigger, badder government to make them. A savvy, Machiavellian US government policy would: 1. Promise corporations the world 2. When factories are built, expensive machinery shipped in, and personnel trained, renege and hike taxes, but not so much as to force a write-off 3. When foreign governments make it difficult for US corporations to operate factories abroad and they ask for diplomatic support, shrug and tell them play stupid games, win stupid prizes 4. Do not apply the above policy for US corporations doing natural resource extraction abroad. (i.e. act more like China)