> Business Week - February 26, 2001
>
> LOW-SKILLED JOBS: DO THEY HAVE TO MOVE?
>
> By Aaron Bernstein; Bernstein writes about labor markets and social
> issues from Washington.
<snip>
> The combination of teams and technology has slashed the cost
> disadvantage of producing in the U.S. New Balance's U.S. workers turn
> out a pair of shoes in just 24 minutes, vs. about three hours in the
> Asian factories that make the same product, says Herb Spivak, New
> Balance's head of operations. If the U.S. workers were no more
> efficient than those in China, New Balance's labor costs in the U.S.,
> where it pays $ 14 an hour in wages and benefits, would be an
> untenable $ 44 per pair of shoes. But the company has whittled the
> cost down to $ 4 a pair vs. $ 1.30 in China, where labor costs are
> about 40 cents an hour. ''[In Asia,] their labor is so inexpensive
> that they can waste it,'' says Spivak. ''Ours is so dear that we come
> up with techniques to be very efficient.''
>
> Davis says New Balance can remain competitive under these
> circumstances. The remaining $ 2.70 labor cost differential is a
> manageable 4% of a typical $ 70 shoe. And it's offset by the
> advantages of producing in the U.S., says Davis, where he can fill
> store orders faster than rivals and whip out style changes more
> quickly. This also allows New Balance to forgo extensive advertising,
> so it can afford the $ 15 million or so in annual capital investments
> required by its high-tech approach. Profits come in at midrange in the
> industry.
I would have thought at least part of that $2.70 labor cost differential would be amortized through savings in transportation. But the author never mentions shipping costs, just shipping speed. Does that reflect reality? That bulk shipping from China is just as cheap as local shipping, it just takes longer?
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com