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China Hits Turning Point ~ Jobs Coming Back to the U.S.

Bob Adelmann | The New American | February 28 2012

As reported in The New American here, the difference in wages between Chinese and American workers is narrowing rapidly. Part of the reason is that China has passed the Lewis Turning Point.

First noted by Bloomberg, that turning point hit the Chinese labor markets in the weeks following China’s Lunar New Year holiday in February, 2010, when hundreds of thousands of Chinese had to be enticed to come back to work. They were bribed with gifts, parties, and cash bonuses. Sunny Jia, sales manager for the Jufeng Handicraft Company which makes linen goods, leather bags, and cabinets for retailers in Britain and the United States, explained, “We needed to do more to make them stay.”

Honda was forced to raise wages by 24 percent at one of its parts-making plants after it was shut down by a strike demanding better pay. Foxconn Technology more than doubled its base salary to reduce worker discontent. All of which is going to prove the theory of economist Arthur Lewis that when the supply of cheap labor disappears, wages must rise. At the time, Huang Yiping, an economist at Citigroup, predicted: “If the first decade of the 21st century saw China rapidly rising as a global manufacturing center, the post-Lewis turning point could see the opposite. Global manufacturing activities concentrated in China today may find their way elsewhere.”

That is already happening. Last year U.S. factories added 237,000 jobs and another 173,000 are estimated to be added this year. National Cash Register moved its manufacturing facility building ATMs from China to Columbus, Georgia. General Electric is adding capacity to produce water heaters once built in China to their Louisville, Kentucky plant. Farouk Systems, which makes hair dryers, moved 1,500 jobs back from China. Coleman moved its water heater facility back to the United States.

It’s the math. By the time every part of the economic equation is analyzed — which includes not only wages but rising land costs, the long time to it takes to deliver the finished product, the rising costs of shipping and transportation, the necessity to make and monitor changes in final products as well as risks to intellectual property theft in China — it is making more sense than ever to bring back those operations and the jobs associated with them to the United States.

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