In all the talk about “outsourcing”, “downsizing”, and the loss of manufacturing jobs who profits?
Of course the overseas laborers themselves make a pittance.
It’s the importers though who are making the lion’s share of the profits while, for example, the Chinese firms operate with narrow margins.
That makes sense of something that happened here. I live in a town where a manufacturing firm actually ended up being owned by a Chinese firm. They were pledging their assets as collateral on so many different loans that when they were caught the whole financial house of cards collapsed forcing the closure of this plant. 1200 people lost their jobs.
So I believe there are really tight margins for the people Americans tend to vilify for “taking their jobs”.
Where does most of the money actually go though?
Much actually circulates in the United States through channels of supply, distribution and marketing…but not the manufacturing. Middle men are taking their cut and hoping the workers that got laid off in the manufacturing sector will find other jobs with which to afford their goods and services.
The trick is to find a way to make a living that cannot be outsourced such as a service that cannot be provided by teleconference and find a way to make it profitable.
Despite the lack of regulation, no environmental laws, etc. the wages are on the rise even in China and cheaper markets are emerging to take jobs away from the Chinese.
U.S. and European officials argue that factories like these, relatively unencumbered by regulation and sheltered by an undervalued currency, give China an unfair advantage.
But a close-up look at the Tianjin Jiahua Footwear factory shows a different picture, one of vulnerability and tiny margins on the Chinese side.
The biggest earnings in the mass manufacturing business, according to factory owners and other industry executives, both foreign and Chinese, are not made by the companies producing the shoes, but by those who market and sell them in the United States and Europe.
Factory managers here offered a reporter a rare, detailed look at the profit margins and the costs, including wages, involved in making these shoes.
The manufacturing process begins with a smooth piece of leather imported from the United States. After 155 laborious steps, it becomes a flawless pair of tan work boots. The factory, owned in part by a foreign investor, sells each pair for $15.30, from which it earns a pretax profit of about 65 cents.
A major U.S. retailer, after factoring in shipping, store rent and salaries, sells the boots for $49.99. Assuming a pretax profit margin of about 7 percent, an average among large U.S. retailers, it earns $3.46 on the same pair of boots.
Like the containerloads of shirts, trousers and electronics shipped from Chinese ports every day, the Tianjin boots contribute to China’s $200 billion annual trade surplus with the United States. But the trade statistics fail to show the value those boots create in each national economy. Although they are tagged “Made in China,” by the time they sell for $49.99, the $15.30 boots generate twice as much wealth in the United States as they do here.
Of the roughly $46.50 the U.S. retailer spends to get the boots to market, at least $29 circulates entirely within the United States, paying the salaries of advertisers, Web site designers, truckers and salespeople.
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