The Real Reason American Manufacturing Jobs Have Gone Overseas

by adrianchilders on January 23, 2012

There was a great post everyone was talking about in the New York Times this weekend that highlighted why the U.S. is loosing manufacturing jobs to Asian countries by the boatload. It turns out low labor costs are only a small reason of why American companies choose to manufacture products overseas instead of the United States.

The post focused on Apple, an iconic American brand known around the world and Foxconn, a manufacturing powerhouse that employs over 1 million people worldwide and actually makes the devices for companies such as Apple, Amazon, Dell, HP, Motorola and several others. Even though many executives that work for American companies in the U.S. would rather manufacture their products at home, they say the U.S. simply can’t compete with foreign countries anymore. They cite lack of technical skills needed, that companies in the U.S. are slow and less efficient than those overseas and that workers in foreign countries are willing to work harder and longer hours. The worst part of American workers essentially being stupider, slower and lazier than our counterparts in foreign countries is that the entire supply chain for most finished products is now on the other side of the world.

Hundreds of smaller pieces go into an iPhone, iPad and other electronic devices we all use and love. If these finished products are going to be made efficiently at the lowest possible price all the production input manufacturers need to be close to one another and right now most are in China. Even if hardware manufacturers that sell a finished product wanted to manufacture in the U.S. the challenge goes far beyond labor costs because it’s extremely difficult to coordinate the logistics of the hundreds of smaller inputs that go into a finished product such as an iPhone.

Although middle class Americans suffer when economies transition such as those from an agricultural economy to a manufacturing one or manufacturing to an information age, we are now faced with a much larger challenge, which is the huge increase in labor force. Americans have never had to compete with the hundreds of millions of workers in the Chinese labor force that twenty or thirty years ago were walled off from the global economy. The workforce in China, India and other newly industrialized countries countries dwarf the entire U.S. population and they are willing to work under much stricter conditions than we are used to working in.

The only external factor that has been positive for Americans that has slowed manufacturing jobs from going overseas much quicker than it has is high transportation costs thanks in large part to expensive fuel. While it’s important for the entire supply chain of a finished product to be close to each other it’s also important to be close to your customers. That’s why perhaps Foxconn has opened a huge facility just outside of Juarez, Mexico literally less than half a mile South of the U.S. border.

It will be a challenge for these manufacturing jobs to come back to the U.S. although many manufacturing plants never left the U.S. because unless companies produce products on a huge scale such as Apple, it still makes sense to manufacture close to where your customers are. It’s expensive to have a company on the other side of the world manufacture a product to exact specifications and have it shipped on time.

The U.S. can’t compete with the efficiency of the productive workforce around the world alone. We can fix our schools and invest in technology but if we are going to compete with the rest of the world we need to work with our trading partners in North America. Mexico, for example offers a less expensive workforce than in the U.S. which is why many companies in the U.S and around the world have set up shop in cities along the Northern border of Mexico. If a manufacturing plant is going to move to another country it’s better that they operate in a country that borders the U.S. so that the opportunity still exists for American companies to be involved in the supply chain of a finished product. There is no excuse why Canada, the United States and Mexico shouldn’t be able to produce everything we need in North America and then still export products to foreign countries.

You can read the full article, “How the U.S. Lost Out On iPhone Work” in the NY Times here.

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{ 6 comments… read them below or add one }

Jesse February 23, 2012 at 12:51 am

Stupid, Lazy? This is out of content specially to the people they are selling to. With jobs going to a country hostile to U.S. interest I see this companies going down hill in the near future hope they are having fun while it last because it will not last that long when they start going down hill, I sure wont approve for a bailout for these type of companies. Nor interested in their cheap overpriced products.

Gonzalo July 10, 2012 at 9:44 pm

This article supports the corruption we live in our beloved country, America. Our people are ready to work long ours, indeed yes! Look at the many people that now in America have to work to shifts to be able to survive! We have the best universities and best researtch institutions in the world. Doubt? Why so many foreign students come to America then? The truth of the fact is we live in what we call the Global Economy, where the economy is run by the a few, a few banks, that control every imaginable sector of our lifes. We no longer have a governing government, but a body that have sold their souls and are consipirating against America. So yes, make no mistakes, Americas are ready to work hard, harder than any other citizen in the world, but for a fair wage, for a decent living condition, not like in the underdeveloped world.

jay jenkins September 6, 2012 at 5:38 am

let any one out source labour to other parts of the world just place a 70/80% tax on there product when they want to bring its goods onto the country
JJJ

Keith September 25, 2012 at 5:15 pm

The American worker/consumer combined with our government is entirely to blame. Simply put we look to the lowest price in everything, a $100 item made in China out sells a $110 identical or better item made in the US. These same consumers demand higher wages at work. The laws of supply and demand come into play and eventually all the good jobs go overseas where the tax and labor rate are such that US companies can again compete with the rest of the world to deliver the competitively priced items. Look in your garage, clothes closet and at your white goods, if these were designed or produced overseas, you are the part of the problem, if you vote to have someone in office that spends more than they take in, you are the problem. It is time to pay our bills and that is something we as Americans have excelled at avoiding, especially when we have someone at the highest level of government telling us that we should just take it from the rich. When I was growing up that was called theft, I guess we are now both financially and morally bankrupt.

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