Beating "Slave" Labor

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    Professor Herbener,

    I often hear people making various claims about the United States not being able to compete with countries that employ what they consider to be “slave” labor. While at face value, I can understand why this upsets people since it does seem to be having the effect of sending labor jobs to other countries; what I don’t understand is why we are not seeing greater capital development and utilization keeping jobs here.

    A quick example: I recently bought a suit jacket that was made in Vietnam. It was no doubt stitched together in a factory with many workers stitching by hand or with rudimentary tools/machines. Why do we not see mostly automated factories popping up in America that employ maybe a few (relatively speaking), well-paid workers to supervise or manipulate many machines at one time? For the past couple hundred years we have seen well capitalized workers competing with low-cost labor very successfully. What is preventing this from happening now? Or is it happening, and I’m simply not seeing it?

    Thank you.


    Here is the Bureau of Labor Statistics data on textile workers:

    If you go back to 1990, the level of employment in textiles was around 500,000. It started to decline in 1995. It has fallen steadily since then until 2009 when it leveled off.

    One aspect of the explanation for this is that as the Chinese were allowed to enter into the international division of labor through market oriented reforms there was a huge cost differences between production of textiles there and here (with our protected companies and unionized labor force). By purchasing textiles in China and selling them in America, Wal-Mart and other retailers set in motion a process of reallocating resources and capital investment to take advantage of the greater efficiency of production in China. It appears that the adjustment was complete by 2009. Since then, as you suggest, the cost structures seem to be the same as no more downsizing of our textile production has occurred.

    Of course, a complete explanation would have to look at the details of the history of the industry over the last twenty years.

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