American Business Weighs The Actual Costs of Made in China

HopeTracker| Wired Magazine isn’t suggesting that disenchantment with China will send the majority of America’s lost manufacturing jobs back home. But they do make a strong case for cheap labor no longer being the top priority of some sectors of American business — especially as labor costs rise in China.

The labor market is in a state of balancing-act flux, argues Made in America: Small Businesses Buck the Offshoring Trend. American labor costs are dropping as China’s rise.

A January 2010 survey by the consulting firm Grant Thornton found that 44 percent of responders felt they got no benefit from going overseas, while another 7 percent believed that offshoring had actually caused them harm.

Companies like Apple take over entire factories, putting their own systems in place. Smaller companies must accept the standards they get, and often the products are subcontracted in China to factories with minimal quality control.

Intellectual property laws are almost nonexistent in China, and American companies are seeing their own products being knocked off at cheap prices.

In 2008, three McKinsey consultants analyzed the production of midrange servers, taking into account everything from shipping to quality to exchange rates. They concluded that fabricating such devices in China made sense in 2003, when the required labor was 60 percent cheaper there than in the US. At that time, they estimated, the per-unit savings ran about $64. But this advantage, McKinsey concluded, had vanished by 2008: “After factoring in the higher labor and freight costs, we find that the former offshore savings have turned negative—a burden of an extra $16.” Read on at