You’ve probably began wondering many years ago why everything you find in a store seems to be made in China or why we import everything from China.
The short answer.
It’s a compilation of labor laws, minimum wage, regulations, and unions that make it impossible for some products to be made here. Because of all of these things, almost everything you find in the United States is now made in China or another country that does not have problems with any of those things.
It used to be that only cheap and low end items were made overseas but because of how inefficient and restricted US businesses have become, we’ve began heavily importing even high-end electronics from over seas. A lot of businesses that used to be US based have actually closed facilities here and re-opened them in another country.
Why do these things have such an impact on business?
Simply because people are in business to make a profit. If you can’t pay the workers and have enough left over to reward the shareholders that took the risk with their investment in the first place, then there isn’t any way to make a business function without subsidies.
The United States government has started providing subsidies for farmers to keep them in business because it’s a national security risk not to have our own farms and food supply here in the United States, but that’s another time and place.
Simplified for Understanding
Let’s say we want to make pencils in America. Let’s say a typical old-fashioned pencil costs $1.50 for a pack of 10 or 15 cents per pencil (these are the ones imported from China).
In America, we register our company, we license it, and we get insurance for it. We also hire a lawyer and an accountant because our taxes and legal issues are complex in America. This adds to startup costs. Let’s say we were able to get this company off the ground for $5000. Well in China, this amount is significantly less, making it easier to start a company.
Let’s then say that we get all of our equipment (from China of course) and we setup our factory to make pencils. We lease a building and all that fun stuff.
We find out that after ordering the materials and paying for the utilities that it costs us 14 cents to make a pencil that we can sell for 15 cents. That’s a 1 cent profit per pencil. We hire on 10 employees which we have to pay at least minimum wage.
Pretending minimum wage is $7 even and they work 40 hours a week, we’ll have to pay each employee $280 a week. God forbid they are in a union because they’d be fighting to make more than that all the time and we’d have to hire someone to negotiate with the union.
In addition, we also now have to pay half their social security and medicare tax and a bunch of other fees for having employees which also adds more paperwork to both our legal and accounting team. Thankfully we don’t have more than 50 employees or we’d have to pay for medical insurance as well — thanks to Obamacare.
At 1 cent profit per pencil just to pay for employees each week this company would have to make $2800 or sell 28,000 pencils just to break even on employee compensation, not to mention, they have to make a profit for the investors, pay back start-up costs, pay for legal and accounting fees, taxes, and so much more, but we’ll leave all that out for now to keep it simple, even though business in America is not simple.
What happens if this company can only make and sell 25,000 pencils a week with ten employees? What if, due to limitations in technology that this was all the number of pencils any company could really make and sell with current technology?
The obvious answer is they wouldn’t be able to stay in business without charging more per pencil but it gets harder to sell the same pencil for more money, after all we want things as cheap as possible. You wouldn’t buy the exact same car for more money, why would you buy the same pencil for more?
But we still need pencils in America. No problem, China to the rescue!
This is where global competition comes into play and the United States loses bad…and I mean real bad. The playing field for business in America is far from even compared to other countries, a pencil company in China is able to make a profit selling the pencils for 15 cents each, where an American company has no chance of being profitable or staying in business.
Here’s the difference:
China has almost no restrictions; no child labor laws, no minimum wage, less regulation, and a lot more advantages over the United States. This means they can hire children if they’d like and pay them 15 cents a day. They can hire more employees for cheaper, which means they can continuously produce more and more, allowing them to single-handedly produce enough pencils to meet the demand in the United States.
If a worker can produce 2500 pencils a week by themselves then it results in $250 profit for the company. It costs an American factory $280 to pay that worker, but in China they could pay a worker 10 cents an hour which would cost a whopping total of $4.
Even if they gave their employees $5 an hour, it would cost the factory $200 for that worker, leaving $50 in profit for the company to continue on. Not only can they continue on but they can afford to ship all those pencils to America and the Chinese company is still profitable when an American company cannot be.
Conclusion
Minimum wage in America forces a lot of industries out of America. Added in are all the regulations, insurances, taxes, and more.
Imagine a few hundred years ago when you went to the local black smith in town to repair something. He didn’t have people forcing him to get insurance or pay for his employees health insurance. There was no minimum wage or taxes to be paid. This model is what made american business take off and what made our country wealthy. Now the reverse trend is happening where we are becoming less prosperous over time.
It’s only a matter of time before we are working here for 10 cents an hour and shipping our products to China.
Minimum Wage
A lot of people in America feel entitled to receive a certain pay and unfortunately, government hand outs lessen the incentive for people to work, but with unemployment so high, the minimum wage law makes no sense at all.
Wages naturally increase once maximum real employment has been reached, and this doesn’t mean overall, this means per field or similar employment.
When you run out of Doctors and they are still in demand their wages go up. If minimum wage stopped existing today in America, companies would be able to hire employees for less. Eventually everyone who wanted a job would have one, but then a magical thing happens to balance the equation. Companies keep expanding and growing because they are making a profit but now there isn’t anyone looking for a job.
So how do you get workers when there are none?
Simple! You increase wages and offer more benefits. This is what was happening in America during our industrial boom but then somewhere along the way someone decided that workers were entitled to higher wages and benefits and with a few swift laws essentially destroyed jobs in America and shipped them over seas.
Unions, Regulation, Taxes, Labor Laws
Good or bad, all of these add costs to running a business and hiring people in America, we can all agree on that point.
As long as other countries have less of these things, they will continue to beat us in the market place. I’m not going to go and say we need to get rid of these things, but we really need to reconsider how strict or high we need these things to be because it certainly puts us at a disadvantage in business for reasons you can probably already figure out.
Solutions
Obviously, you’d want to lessen or get rid of the things affecting business in America, at least until everyone is employed, then you’d find an equilibrium
People like Donald Trump have suggested placing an import tax on China to level the playing field.
We won’t get into all of that in this post but you should know there are some things that can be done!
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USA is still No. 1 manufacturer in the world. Why we don't see this? Because most of this production is not consumer goods. USA manufacturing sector buids ships, airplanes, very advanced electronics, weapons, farming equipment, machinery, and many, many more. But there are also many consumer-related products made in USA. Look at http://www.productfrom.com/country/US/ - cars, home appliances, audio, perfumes, consumables. Wanna buy American-made goods - you just have to open your eyes and search!
America has probably the best acronym in national history and is still twice as big as chinas. America buys so much stuff on a daily basis that its hard not to become wealthy and successful in the american dream. China and america have this sort of agreement that china practically sells everything to America and we buy it so their government practically relies on americas. other than that, americas probably is the only country with so much Chinese stuff.Ive been to japan that worlds 3rd largest economy and EVERYTHING was american and none Chinese. same exact thing in china! China has more stuff in america than in its own country
Here is what really happened!
Years ago Joe told Charlie that "Gee guy, if we send our products to be made in Taiwan, we can make 30 times what we make now!".........then years later Bob says to Jerry "Gee guy, if we send our stuff to Japan, we can make a ton of money!" And of course we come to.....yep, CHINA! We Americans are the greedy ones who want money, money and more money instead of ''making a fair and reasonable living''....so it is our fault and now we are blaming China because WE sent them everything, the products, the blueprints, the technology. All they did was say "Sure, okay, we'll make your products!" Do they make them well....of course not...it is junk. But it is our fathers and grandfathers who made China possible.....and it is up to us to get it back....which will never happen. Do I wish thing were different...yes I do!
That's interesting, but what I saw is that unions strong armed management, fit example, in the steel industry. They were overstaffed, with great pay and benefits. However, the labor union wanted more and more and... bankruptcy.
Let me give you one example where that is not the case: Hostess.
Hostess was a very profitable company, but executives wanted more profit, so they decided to combine it's bakeries to one big plant. As a kid, I remember the smell of freshly baked bread every time we passed one of it's bakeries...so we bought the bread. Advertisement was also common back then, but it takes away from profit, so that was stopped.
Many years later, executives complain of profits, and ask employees to take a cut. They did, and that money went to the hands of the executives in raises and bonuses for themselves. They tried to do that again, and the employees said they weren't going to fall for that again, but of course, the executives blamed the employees, just like you did.
The baker did his/her job. The packer did his/her job. The shipper did his/her job. The ones who failed were the executives.
Unions destroyed this country! Safety laws should be put in place but after that it should be up to the company what they want to pay! You have the choice to work somewhere else!
Yes I agree with the tax and that some people feel entitled to work and a job. If we stop spending money on crap products overseas the we can send a message to the business owners here in America that we buy American only.
Another thought... If we didn't have a minimum wage then I and my wife would have to work more than 40 hours a week just to live! Think of people in the most expensive cities like New York City and such where rent is like 2-3 k for a crappy apartment. Minimum there is a cheap shot and your forced to find higher paying jobs and have someone split the rent so that you can live. I can't imagine what it's like to live in china but also .15 cents an hour goes farther then in the states. Which is also why everything is made there. So to me ... We are paying them a higher wage for their economy compared to ours.
I never thought of it that way. You, my friend, are wise to the world around us.
You can't have the cake and eat it. On the one hand you want a market economy where prices are determined by market forces but then you want to interfere with minimum wages. Shouldn't labor be subject to the same forces?
I understand all the above. Why? We are United States. Americans are giving their hard earned money to China.
Cheap, put the products are JUNK! Was there someone who agreed to this?? Who??? Thanks!
The very smartphone or computer you used to type your ignorant response was made... in China. Think before you say stupid things.
The iPhone and iPads are not actually made in China. They are assembled in China with parts supplied by other countries. The innovation, sales and marketing are in the US. Chinese contribution to these products is about 5% of the US contribution. The end assemblier/package & ship country gets the credit for the entire product. No longer are many consumer items invented, designed and manufactured in a single country. Trade numbers are misleading with the way the WTO characterizes sales of products.
Seems the only ships made in America are Warships which are subsidized. Regular huge ships usually made overseas.
The problem is that if China stops the assembly line there are no more iPhones.
Because we're CHEAP, that's why we buys junk from China. Otherwise we can buy Italian's or German's, right?
That's easy. If it's junk, don't buy it. When a manufacturer sees that their sales are going to a company manufacturing their product in The States, they will decide to build in The States as well. We still manufacturer in China because the majority only complain that we build everything in China but then go out and buy Chinese products. The other day I went to 3 different supermarkets to buy fish because when I buy salmon I only want sustainable, wild-caught from the US. Yes it's inconvenient but I don't want to eat crap food and I'm not going to just because you made it cheaper.
I beg your pardon. Your hard earned money? You mean that the Chinese didn't earn theirs in making those so call "junks" sold to you? Why do you buy if they are junks? I am sure no one force it on you.
I agree with you the stuff made in China is junk the pencils are junk. We waste our money on cheap products that end up filling our landfills and have to pay for that as well.
China is no different than what Japan use to be; they are learning very quickly, and honestly, they are the king of technology now, certainly in integrated circuits. For example, the United States does not have the technology to make the ICs used today. Corporations sold their sole for profit.
On the other hand, people have learned that products purchased in the States are of same quality no matter what is paid for it. I just purchased a thousand dollars of stone tiles, manufactured here in the States, and when they arrived, 80% were broken, and what wasn't broken, the pieces do not match. It was shit at the manufacture the way it was packaged and picked, and it was shit the way it was shipped. Months of my life wasted working for money for a thousand pound paperweight...MADE IN AMERICA!
I can give hundreds of examples. My 2007 Mustang is another example, purchased brand new for 35,000.00 dollars. My Prius purchased at 20,000.00 dollars in 2017, is of much better quality, and has safety features that I would have to pay thousands more to get in in US made vehicles.
Electronics designed in the US, are designed to last only six months...DESIGNED!
Im finding it hard to see how we can stop buying apple products made in china.
Here's a great idea:
Raise minimum wage AND pencil price, so more people can afford more expensive pencils.
And it's not the same pencil. These regulations also cover safety of materials used, environmental impact and so on.
You wanna buy cheaper baby milk from China, go ahead...
I'm sick and tired of the "cheap" insanity ruining the whole world.
Good comment.
If manufacturing scales and automates then cost reduces eventually.
The politicians could stop all the goods coming in from China any time they wanted to. Too many wealthy people make money by brokering deals with Chinese manufactures. I just spoke with a building owner in Washington D.C. who made his fortune by brokering a deal between Walmart and a Chinese factory to where he gets a cut of the deal for all the Christmas ornaments Walmart sells. He bought a building for ~40 million dollars in downtown Washington recently.
Why can't we just stop buying so many products from china.
Fact is, we Americans are gullible and all the world knows. So they play us for the suckers we are. If we don't buy made in China, Japan, etc., they can't sell it.We are our worst enemy. Open our eyes and see whats going on. Our politicians are selling out our country because they don't care. Wake up America.
Blame it on the unions? The unions brought us an eight hour work day and forty hour week. They brought us paid vacations, holidays and funeral leave. They brought us health care. How do I know? I retired from over thirty years in Teamsters union. I know.
Unions are good for job security but too many people, like everything else, take advantage of unions. You may have been a hard worker but I'm sure you knew a lot of slackers that collected the same wage as you, even though they didn't work nearly as hard as you... Is that fair? That's the problem with unions.
Thank you! Exactly. The reasoning in this article on why company is justified sending work overseas to make a profit is reminiscent to justifying slave labor. If you don't pay people anything, you get a larger profit. Where's the balance?
True, unions did bring good things, which I feel the government should have enforced themselves (like they do in European countries). The downside of unions is that the union leaders take home the biggest chunk of the money from dues.
"Americans feel entitled to making a certain wage." Wow, so sorry 5 bucks a day isn't enough for us to live on when rent is 660 for a two bedroom.
660 were? Here in cali its 1200 so ev
Exactly. What kind of moron thinks Americans are entitled for believing that a full days worth of work should be enough to cover basic living costs. Sorry regular people don't want to live in absolute policy so we can line the pockets of some millionaire.