Wednesday, February 27, 2013

Labor in the U.S. and China - The Case of iPads and iPhones

This article from "The Economist" discusses the U.S.'s deficit with China and how statistics are actually  illusionary hyperboles created by the official data on U.S. imports from China. The article is based on a study done by UC-Berkeley, UC-Irvine, and Syracuse. The authors of the study conclude that despite the fact that most Ipads and Iphones are assembled in China, "the primary benefits go to the U.S. economy." I thought this was interesting because it connects to the article we read in class called Mr. China Comes to America. In the article James Fallows argues that:
"China’s economic and social maturing, tumultuous or smooth as it may turn out to be, will certainly affect the world division of labor. Some very low-skill jobs may move to very low-wage economies, such as Burma, India, and parts of Africa; some will move to inland China; some will be automated or done by robots; some will stay in China, but at higher costs."
Thus, my question is: considering the U.S. still receives the largest share from the production of iPads and iPhones in China (despite the higher labor costs), would Fallows still argue for bringing manufacturing back to America? Perhaps optimistically thinking, he would stick to his argument that in the long run the reindustrialization of the U.S. can be done through policy changes and reforms, opening up more options for the unemployed American workers. However, in the article from "The Economist" the graph below is presented:


This graph essentially reflects that the "main rewards from the production of iPads and iPhones in China, go to American shareholders and workers". Thus, why would American companies like Apple want to go through the trouble of shifting labor to poorer countries or even to America where more jobs can be created? In the long-run, perhaps Apple would want to transfer labor to the U.S. because the same thing that is happening in China now with labor becoming more expensive could eventually happen in poorer countries as well. Therefore instead of investing in manufacturers like Foxconn in poorer countries over and over again (as labor becomes more expensive), why not just invest in manufacturing iPads and iPhones in the U.S. which would bring more profits to American workers as well as the company? Well, the answer is simple: MNCs not always think in terms of the long-run; and especially because Apple and its workers in the U.S. seem to be making a large part of the profit already, I think that companies like Apple would keep moving labor to poorer countries instead of bringing manufacturing back to America. Because it may take centuries until labor costs can start increasing in other poor countries, like Bangladesh or even India. Thus, it may be cheaper to assembly iPads and iPhones in poorer countries than to reindustrialize the U.S which would require large investments along with large policy reforms and whatnot. The rich have a tendency to want to become richer. If moving from China to a poorer countries means they will save money as opposed to moving manufacturing back to the U.S., Apple will choose the former option.

3 comments:

  1. This comment has been removed by the author.

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  2. I think your conclusion is accurate. Apple is not responsible for the American workforce. The company's obligation to the USA is trumped by its' obligation to its shareholders. Fiduciary responsibility is the tiller that guides any multinational corporation.

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  3. Yes!
    Liberal economics, the invisible hand and freedom of the press / speach are all very healthy for the global village.

    Liberal economics
    http://lexicon.ft.com/Term?term=liberal-economics


    Invisible hand
    http://lexicon.ft.com/Term?term=invisible-hand

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