A More Complete Globalization Analysis

A More Complete Globalization Analysis

Any discussion of globalization tends to be sharply focused on the lost of traditional manufacturing jobs. The conversation begins with the fact that this manufacturing facility closed and the production was moved to “you name the low wage country“. I read an article which quoted an analysis performed by the Personal Computing Industry Center at the University of California, Irvine. The center estimated that for the Apple iPod, thought manufactured in China, that the Chinese labor content represents 2% of the wages involved in the design and manufacture of the product. Whereas the American labor content represents 70% of the wages (engineering, software and distribution). The implication is that if the total picture is analyzed, the labor that is being performed in “you name the low wage country” are the lower skilled value add labor and what is be retained in America is the higher skilled value add labor.

Of course the ratio depends upon the type of product. Highly technical electronic products would have a more favorable American labor content. Products with less technology, such as furniture, would probably have a distribution that not as skewed, thought the furniture designer and all of the support labor to market, sell and distribute would be significant.

The true issue with globalization is that the value add labor in America requires a skilled work force. Americans have benefited significantly from the higher standard of living that has resulted from globalization. We should focus on the real issue, how do we train the next generation of workers so that they have the opportunity to participate in a global economy.

Tim C
tim@tichenassociates.com