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Labor Article

The View from America


Job Loss and Pressure on Wages: Critics blame China's low wages and low labor standards for the loss of American manufacturing jobs, which have been outsourced to cheaper places like China. While outsourcing does lead to some job losses, by now, most economists and experts believe that more systemic causes such as greater productivity and technological innovation, as well as a shift to service-sector employment are more responsible for manufacturing job losses in the United States than is outsourcing. After all, outsourcing is a phenomenon that has been happening in the U.S. for a long time (for example first in regional shifts whereby the textile industry moved from New England to the South, and starting in the 1980s, overseas to lower-cost countries).[1] In the last 20 years, China has specialized in the manufacturing of labor-intensive products, such as footwear, apparel, and furniture that were already manufactured outside the U.S for many years now. To be sure, those still in these lower skilled industries in the U.S. have faced stiff competition from China and encountered downward pressure on wages, but overall, there are comparatively fewer Americans working in these sectors.

Job Growth: The other side of the balance sheet however, has a growing China (made possible in part by millions of Chinese working in manufacturing jobs at wages that may be below U.S. standards, but that are higher than ever before) importing skill- and capital-intensive goods such as semiconductors and microprocessors, aircraft, and machinery,[2] and many of them from the U.S., which has led to creation of new jobs in these sectors, and the raising of the relative wages of skilled labor. In fact, U.S. exports to China rose 300% between 2000 and 2007, and nearly every U.S. state has recorded triple-digit growth in exports to China since 2000.[3] According to a Morgan Stanley report, trade with China in 2004 helped to create 4 million new American jobs and to save American consumers $100 billion.[4] Yet, seldom does this fact of new job growth as a result of trade and engagement with a growing China get any media attention.

Cheaper Goods: According to Mark Marenberg, Columbia University law professor, the inability of Chinese workers to form free trade unions to uphold workers' rights has contributed to the cheap cost of goods for Americans by reducing the cost of Chinese manufactured exports anywhere from 11 to 44 percent.[5]


So, Why Blame China?


While many economists believe that on balance the low-cost of Chinese-made goods outweighs the loss of American manufacturing jobs, the difficulty is that the benefits of outsourcing (cheaper goods) are more widely distributed, while the negative toll, which although very real for those out of work, is more sector and region-specific, and tends to affect select groups of U.S. workers[6] who are disproportionately union members. These workers and their unions can often and do form a strong political bloc to apply pressure on politicians, or are often in "swing states" such as Pennsylvania, Michigan and Ohio that are important to politicians’ electoral success. For these displaced workers and politicians, blaming China can be easier than blaming the companies and corporations that chose to move their operations to China, and from whom they may be buying cheap goods from at the same time!


Chinese Consumers – The Main Attraction


As observers of U.S.-China labor relations like Kent Wong have suggested, instead of blaming China, which only encourages "protectionism, chauvinism, and racism," American unions might take a look at the motivations of and the role played by the U.S. government and U.S. corporations who have shown little loyalty to American workers and greater fealty to their bottom line.

Indeed, contrary to the popular opinion that low labor costs are the main reason for American job losses to China, the main attraction for American firms in China remains access to the large pool of 1.3 billion Chinese consumers. Now that Chinese consumers have more disposable income but require targeted on-the-ground handling due to the segmentation of the population into different markets with different dialects and different per capita income, American firms are reaffirming their presence in China more than ever. After all, it is much more cost effective to produce and sell in the same market. In fact, 46% of respondents in a 2007 American Chamber China Business Report are manufacturing in China for sales in the China market, with 23%, manufacturing or sourcing in China for the U.S. market, 20% for importing into China, and the rest manufacturing for other non-U.S. markets.[7]

1 Committee of 100, “Committee 100 Outsourcing Resource Guide,” Committee of 100 Initiatives Publication, November 30, 2003 – May 31, 2004, http://committee100.org/initiatives/publications_outsourcing.htm (accessed 7/22/08).

2 C. Fred Bergsten, Bates Gill, Nicholas R. Lardy, Derek Mitchell, “China in the World Economy: Opportunity or Threat?,” in China: The Balance Sheet: What the World Needs to Know Now About the Emerging Superpower, New York: PublicAffairs™, 2006, 74.

3 The U.S.-China Business Council, “U.S. Exports to China By State: 2000-2007”, The U.S.-China Business Council Report, 2007, http://www.uschina.org/public/exports/state_exports_2007.html (accessed 7/22/08).

4 Li Ruogu, “Real Issues in China-US trade imbalance,” China Daily, May 9, 2008, http://www.chinadaily.com.cn/china/2008-05/09/content_6672186.htm (accessed 7/23/08).

5 Loretta Tofani, “Salt Lake Tribune Special Report: Chinese workers lose their lives producing goods for America,” Salt Lake Tribune, Special Report, http://extras.sltrib.com/china/ (accessed 12/7/07).

6 Committee of 100, “Committee 100 Outsourcing Resource Guide.”

7 The American Chamber of Commerce in Shanghai, “Executive Summary: AmCham Shanghai 2007 China Business Report,” The American Chamber of Commerce in Shanghai 2007 China Business Report, 2007, http://www.amcham-shanghai.org/AmChamPortal/MCMS/Presentation/Publication/PublicationCustomization/Content.aspx?Type=1&GUID={E3337DDB-28FD-457D-96B7-2C77E21A2A90}&tb_Name=PublicationCustomization (accessed 7/23/08).