It will always be like this until scale ramps up and costs come down as infrastructure ramps up. China's advantage is always communicated as cheap labor but it's also the ability to almost infinitely scale production lines in a short period of time. America has mostly lost the muscle memory and tooling to do this. And that ability to scale matters with materials costs.
There are incentives that would benefit domestic producers and companies but those take time and don't make good soundbites for politicians.
The blunt tariff sledgehammer that was dropped isn't going to do it. Small experiments like the one in the article will try and mostly fail. Meanwhile producers will find loopholes and workarounds to tariffs. And the margins and viability of domestic designers and businesses will continue to weaken.
Consumers will increasingly eat the cost and lose the convenience.
I think it is worth mentioning how much more cheap capital is available for manufacturing. Chinese state policy—- monetary, fiscal, and social—- pushes up the savings rate, enormously lowering consumption, while restricting the range of consumer financial products. That puts more savings in state banks and keeps interest rates low.
This has come up at the expense of their own consumption however, and a reliance on exports instead. Thankfully China has been focusing on diversifying their export markets along with increasing internal consumption in the last decade.
Thank you for raising that point. I would love any recommendations you have to learn more about internal consumption shifts in the last decade.
There are the obvious explicit government initiatives to boost consumption, but they've also made some strides in reducing goods and luxury taxes. An Apple iPhone used to be 20-40% more in China (it is technically imported because it is made in an SEZ), but they are only priced at slightly higher than the states now. Cars used to be a huge splurge but cheap EVs are affordable by anyone with an OK job now (although you might not be able to park it if you live in a big city). On my trip a couple of months ago, the malls were booming in a way that I didn't see in 2016 when I left China.
Thanks for sharing your experience. That is very interesting to hear.
All high school students should be required to complete the Factorio tutorial before graduating.
Factorio is just a programming game with a manufacturing texture pack.
What we want is wood shop and machine shop classes.
Humbly and politely disagree.
Factorio taught me about supply chains, manufacturing bottlenecks, and tooling dependencies. These concerns don't really crop up in day-to-day programming, but they reveal a lot about why we struggle manufacturing anything in USA anymore.
If it's about supply chains and the like, Eve Online might be a better fit, it's got the factor of time, deal-making, social interaction, theft, war, blockades, undercutting, etc in there as well.
like, I can see a high school class set up their corporation, get mining set up, maybe own a station, get production running... but then a nullsec alliance is like haha fuck you and completely undercuts them, or the recurring player event where they block / destroy anything coming into or out of the main trade hub starts.
Factorio is pretty predictable... or maybe I've played it too often so I know what to consider for the long term. I should get some mods or change some settings to create calamities like in the old Sim City.
But we don't have a shortage of people who understand those things. You can learn them with a passive interest while hanging around with your laptop on the weekends. We have a shortage of people who understand how to actually make things in a non-copy/paste environment.
There are so many ways that mother nature says "fuck you, fuck your work" that you never get contact with in virtual environments. In fact the whole point of virtual environments it to remove that brutality. We have a dramatic shortage of young people who are interested in learning how to wrangle with mother nature OS rather than computer OS.
When I did IT in manufacturing, we outsourced most of the 'understand how to actually make things' tooling type people jobs. We didn't need them full time and could get way better experts via outsourcing than we could hire.
What we needed were wage slaves paid low enough to make the economics work, even in our small town without many employers that was the tricky bit. Especially every year when health insurance premiums went up. You want to help American manufacturing, move healthcare costs off their back and to the government.
To be able to design any manufacturable item, you have to know that a wrench is used to tighten bolts, and a screwdriver must be able to reach the screw. There are people who don't. Some of them graduated engineering school with me.
Second this, I have stories...
I think you're both right. If the wood shop class was a class in how to run a wood shop (not just in how to run a lathe) it would be the best of both worlds.
Factorio is often described as a game for software developers (i.e. it feels like you're programming when you play). Are those really the critical skills that allowed China to grow in manufacturing so quickly?
I'm not sure shop classes fill that need either...
Do you work in manufacturing?
We manufacture plenty of stuff in the good ol' USA, what we struggle with is manufacturing cheap things which require large labor input.
Maybe we should just skip directly to 3D printing? Wood shop probably isn’t the place to start, but there is a starting point for kids somewhere.
No, this doesn't solve the right problem.
We bees to put injection molding machines in schools, CNC machines cutting the tooling, teach people how to make real things in real factories with realistic costs.
This is the expertise that left these shores 20 years ago. Tooling manufacturing, automation, semiconductor etc.
They have, at least in some places. Where I live (Austin TX) I've been in multiple high schools that have extensive Manual machine shop/3d printing/CNC/Electronics/etc labs for students to use. It might even be at the point where the nicest/most complete machine shops in town are actually in the suburban high schools. Go to the local FIRST https://www.firstinspires.org/ competition and talk to the kids from the high schools in the more expensive parts of town where their parents are getting tens of thousands of dollars in donations every year for the teams. Whether any random kid can use them is a different story, but they do 'work' if by success having both of your school's FIRST team leads go to MIT is any indication, as happened last year at the HS my kid graduated from.
So at least some of our students are being given the opportunity, and there are multiple paths to success, but maybe the largest difference is that while truly talented multi disciplinary young engineers (and I work with a few) are rare, they always have been. The real questions are probably around social issues, does giving your kid a phone remove the boredom that encourages them to tinker with stuff in the garage, is there a sweet spot of being able to afford an old car, but to poor to pay to fix it, force kids to learn hands on repair skills. Does being able to stop at radio shack/surplus/frys/metal supply/etc and browse racks of stuff on the way home from school encourage kids to build stuff to impress their friends, or is having it delivered in the mail enough. AKA, like me the other day, I stopped a microcenter to get a pedestrian computer peripheral I could have ordered from amazon, but discovered a ESP camera module that gave me 'ideas'.
Exactly, your post read like a highlight film from my childhood and engineering upbringing. Thank you.
I'm afraid we have far more basic problems than that - illiteracy in their fingers. We have people who can't use a knife or scissors, let alone a power tool.
3D printing is an excellent introduction to just making an actual object in the real world. It's cheap and accessible, and has obvious design limitations to fall into and learn from. The step from 3D printing to full CNC is a lot less than the step from nothing to 3D printing.
3D is heavily used in China as well for small scale manufacturing and prototyping. It is a good place to start for middle or high school kids, and is pretty accessible and rather safe
MythBusters-types of people can only exist in a country with garages and residential suburbs.
I think what most changed music and mechanics was the transition from suburbia to flatsharing in the city centers.
Not to mention intact families where parents had sufficient discretionary time (i.e. jobs that paid the bills with reasonable weekly hours) and a culture of prioritizing passing down knowledge to children and creating spaces in the home for them to pursue their individual interests and talents. People are not just atomized economic units.
The idea isn't to teach working with wood necessarily, the idea is to teach how to handle the myriad common problems that crop up when dealing with physical manufacturing.
3D printing would be good too, because on the surface it's just "model -> filament -> extruder -> built". But as anyone who has done 3D printing knows, it's constantly fighting 20 different parameters to try and coax your print to actually work out well. And even when you have it nailed down there are still 20 different things that can randomly sabotage it. And even with all that accounted for you still sometimes get off prints.
Not just that - the idea is to give students a taste of what it's like to make things with their hands. 3D printing is cool too, but it's much less hands-on.
As an 8th grader, we had multiple years of wood shop, but that was in the late 1980's.
Went to middle/high school in the 2000s and had not one second of home econ or shop or anything related to it, not even theoretical. The only tools I remember working with other than a pair of scissors, compass and ruler were a glue gun and a scalpel in science labs.
Congressmen should be required to complete the Factorio tutorial before taking office
In Factorio you throw iron ore in an electric furnace and it turns into iron plates. In reality you need coal or coke or charcoal to reduce iron to its metal form. Steelmaking is one of the largest single source of CO2 for a reason.
This is just one example among many. The truth is every single facet of industrial production is incredibly complex and there does not exist a single video game that captures all the nuance. Period. Factorio abstracted away all the boring details of industrial production and that is why it is good entertainment. But it’s still just entertainment. To think someone would become knowledge about industrial production because he played Factorio is like thinking someone is a good driver because he played Mario Kart.
Getting kids aware of and interested in a topic is an important step. I mentor a high school robotics team, not because I have an illusion that those students could skip college and walk into a robotics design job, but because it gets them exposed to mechanics, engineering, programming, experimentation, working in a team, competing against nature and other teams, etc. Ultimately, I think it helps them refine their framework for “what do I like [or dislike] doing?”
Thats the most dangerous thing to turn kids into. They want them dumb and barely powered drill capable.
Cheap labor is the key in that scaling, though? Human labor is still far more flexible than anything else that we have. And a big part of that flexibility is how cheaply you can turn it off. There is a reason seasonal employment is a thing.
I live in Philadelphia. We had a lot of manufacturing here, but most of that vacated the city center in the 1970s and 1980s. I recently was doing some research into urban renewal around my neighborhood, and found a paper about the city's efforts to address a concentrated population of perpetually drunk homeless men, mostly centered in my neighborhood, mostly squatting in abandoned buildings or living in flophouses. The city's approach was effectively to remove them and spread them out - and bulldoze the neighborhood to make way for a federally funded highway, now I-95. A lot of manufacturing businesses just called it quits - the owners had made their money on the backs of cheap labor and hadn't really set up any kind of succession plan, but could retire comfortably. Others moved, mostly out of the city, and by the 90s, that labor was moving overseas.
And that's why I don't really foresee that kind of manufacturing coming back here. In order to survive the race-to-the-bottom pricing that the majority of Americans crave, you need a large labor force that will accept some form of sub-par living conditions. But if you can't earn a living wage, you can't afford to participate in the economy in a way that supports the manufacturing, and then you're back to those mid-century slums.
I'm dramatically oversimplifying things, my main point here is, I didn't really put together how much of early 20th century American manufacturing relied on chronically drunk homeless men.
It's more than that, we've simultaneously allowed for monopolization and rollup of wholesale markets. So in context of the story, the US manufacturer is in a squeeze play between supply cost escalations through the Trump tax regime, and the on the demand side with the big retailers like Kroger and Walmart.
The "made in USA" stuff is bullshit, the policy people DNGAF. The people actually making stuff are screwed. This about about shifting taxation from income and capital gains to consumption.
I agree with most of that.
But companies have been incentivized to offshore production for decades. In many cases policy decisions have immensely rewarded them for doing so.
The end result is those countries (mainly China) have grown into infinite scaling machines. It probably won't unwind any time soon.
And in China retail/consumption is not nearly as consolidated/monopolistic as it is in the US.
Agree, especially with the BS of "Made in the USA". Consumers really don't care; they just want the most bang for their buck. Period.
No. The "cheap labor" myth needs to die quickly.
China's advantage is, and always will be, that the costs of labor in US are bloated by a huge amount of overhead for every working resident
In 2023, the BLS reported that benefits alone accounted for about 31% of total compensation, with wages and salaries comprising the remaining 69%. [1] This 31% includes direct costs like health insurance, retirement contributions, and paid leave.
Now in addition, consider employer-paid expenses that are not benefits or employee compensation: FICA, FUTA, SUID, SDI, FMLA, etc. That depends on your geography, but it can be up to 25-40% additional costs [2]
The all-in cost is at least 35% or more in additional spend [3]
In addition, none of the above capture indirect costs of compliance/overhead, with varied state and federal schemes.
As you can see, we are at a range of ~35-50% of additional costs for each new hire
Now, importantly, try to imagine the effect of this bloat at a national level: Every US business is effectively carrying deadweight of additional ~35-50% costs on its pricing decisions to its customers. Why? Because the bloat is embedded into every domestic input, like raw materials, services, utilities, you name it. This cost spike may impact a few foreign industries dependent on US inputs, but it certainly explodes over US shores, spiking prices of the inputs that most US producers depend for their final goods and services. Now think of what happens to domestic costs of doing business and operating a physical business in US.
So when your cost of production have additional ~35-50% overhead because of all sort of market-distorting mechanisms, blaming china for "cheap labor" is a convenient scapegoat, when in reality the blame should be on US policy of making our jobs artificially expensive.... to fund the state bloat.
[1] https://www.bluedotcorp.com/blog/2023-trend-the-rising-price...
[2] https://www.sba.gov/blog/how-much-does-employee-cost-you
[3] https://www.footholdamerica.com/blog/what-is-the-real-cost-o...
Some of it is China’s willingness to make big capital investments. My wife was shocked at the low price of beech mushrooms at Ren’s Market and I found out these are grown in a huge factory in China where they are very proud that they only have to handle the mushrooms with a forklift. Contrast that to those white button Agricus mushrooms each of which is cut out from the mycelium individually with a knife.
The good news is that they’re building one here
https://finc-sh.com/tag/new/
When you look at solar panels and lithium batteries their biggest advantage is that they invest in large scale heavily automated factories. For really labor intensive and low value things like those dog beds Chinese labor is already too expensive and production is going to places like Bangladesh.
Calling health insurance, retirement and paid leave "bloat" sounds like a satire of a 19th century factory/mine/sweatshop owner. Wow.
Your job is not artificially expensive.
In China it is naturally cheap, they have humongous super advanced vertical and horizontal supply chains at their doorstep.
Need plentiful, cheap three phase electricity? - check. Need some obscure part at scale and immediately?- check. Need advanced engineering? - check. etc. etc.
It's at the point where for many industries the risk/reward just do not make any sense at all (it'll just be loss making no matter how you spin it, government supports etc).
USA's workers directly fund our safety net (such as it is) and public health.
Who pays for all that stuff in China?
gosh, if only someone would think of the small business owners.
Turns out China buys Iranian oil, China makes cheap products out of this oil. China builds lots of new cheap coal plants, west fades theirs out but moves part of their production to China.. etc.
Use of coal in Chinese energy production is not growing, peaked in 2013 according to their stats. They are also building massive solar and nuclear capacity.
But anyway, half of all global coal production is consumed in China. I hope they will manage to get rid of coal in the next 20 years.
It's not just cheap labor. It's labor that is abused, sometimes enslaved.
It's also lack of environmental regulation adherence. China has environmental regulations but they don't always demand compliance. I read about companies paying for scrubbers to be installed in factories and when a team comes to take a tour, still with original filters and low run hours.
> It's labor that is abused, sometimes enslaved.
Maybe 20 years ago? Wages are rising salaries and employers are playing nice so their employees don't jump ship elsewhere. The day of your employer keeping your ID card captive is long gone (unless you are a naked official).
> China has environmental regulations but they don't always demand compliance.
That was also a lot more common 20 years ago than today. These days, cities/provinces are held accountable for AQI reductions, so pretend inspections no longer help their metrics. But I totally get it, there is a lot of material from 2000 to 2015 or so, and they basically live forever on the internet.
Labor is like 8% of the price of a car. That's not the difference between 25k and 65k.
While China does have an advantage over northern states in labor prices it's not why it's so cheap.
> It's labor that is abused, sometimes enslaved
Sounds like average American gig worker.
That is rich from Americans, who exploit illegal immigrants for cheap labour!
Counterpoint: cost of living is ridiculously cheaper in China vs. USA. Workers can be paid 3x less and still have a better QoL. It's a vastly more efficient economy in terms of human capital.
Counterpoint: China is the undisputed leader in renewable energy technology, including battery storage. I don't think they are doing it purely for environmental reasons, but they are doing it.
It's not just the labor, though.
It's the supply chains.
Want to build electronics? You'll need a variety of parts and raw materials that China and its surrounding countries produce, and the US doesn't*.
Want to make clothing? You'll need many different fabrics, buttons, zippers, dyes, etc that China and its surrounding countries produce, and the US doesn't*.
Want to make toys? You'll need plastics, dyes, injection-molding processes, etc that China and its surrounding countries produce or provide, and the US doesn't*.
And this goes all the way back to the mining, the farming, and the refining. The US just doesn't do these things*, even in the cases where we actually have the natural resources here.
This is all way before you even get to the point of engaging with China's skilled manufacturing workforce. (Because yes: these jobs do require skills; you can't just walk in off the street with zero prior experience or training and be correctly assembling widgets or sewing garments within the hour.)
* To counter pedants: Yes, the US may produce some small amounts of some of these things. But we don't produce them at anything like the scale required to ramp up full-on mass production of anything that relies on them to supply the demand of the entire country.
China's biggest advantage wasn't just the ability to scale (which means available labor), but also having entire supply chains in relative proximity, tons of small manufacturers making all the little parts needed, all located in southern China.
That's a bit less true than it used to be. Shenzhen supposedly used to work that way. When some small factory ran out of capacitors in board assembly, they'd send a runner to Huaqiangbei for another reel. But now ordering has mostly moved online. There's less of a role for all those tiny stalls stocking components.
That just cuts out a layer in the distribution chain. The part you want is probably manufactured not too far away.
The US used to have manufacturing cities where you could get everything you needed in specific industries. There was the New York City garment district for clothes. Mary Quant, inventor of the miniskirt, writes in her autobiography, "Quant by Quant", about her first visit to New York with a native guide. She was getting things set up for manufacturing in days instead of the months it took in the UK.
Detroit had cars, of course. Most of the auto parts suppliers were nearby. Now, the US auto industry is very spread out. "Trenton Makes, the World Takes" is still on a huge sign in Trenton, NJ., but it's more nostalgia then reality. Waterbury, Connecticut had watch manufacturers and other mechanical precision devices.
Those centers of industry are mostly gone. Even Hollywood is in troublel
This take and the article get it utterly wrong. The ONLY real headline is, "Americans have gotten so used to free money they can no longer even imagine producing anything and selling it at a reasonable price".
I'm a small farmer and can sell my garlic all day for $1 a bulb. But it's A LOT of work. If I bump the price to $5 less people buy but that doesn't mean I get to give up and say, "oh well, can't produce in America I guess... "
Lol, Americans :(
No. It won't ever go away till socialism is evenly distributed.
You won't get made in the USA as unless you're determined to have subclasses of citizens.
> China's advantage is always communicated as cheap labor but it's also the ability to almost infinitely scale production lines in a short period of time. America has mostly lost the muscle memory and tooling to do this.
...
>There are incentives that would benefit domestic producers and companies but those take time and don't make good soundbites for politicians.
I heard a very compelling argument (at least to me), that the difference, as you say, isn't the labor. The labor cost difference is something like 5% in the China vs 8% in the US. The difference is ramp up time. If you have a product ready to be built, you can get it to market much faster manufacturing in China than the US.
As an example, the Tesla Gigafactory in Nevada took about 2 years (June 2014-July 2015)[1]
Tesla Gigafactory in China took 168 days to construct (January 2019-October 2019)[1]
The cost of the factory construction, materials and labor, isn't the biggest loss when deciding where to build your factory. The biggest cost is the opportunity cost of not manufacturing your product for 15 months and the potential of losing any first to market advantage if you have competition.
The time to get your product to market, especially if you're a new company with no income operating on investor money, the time spent trying to manufacture in the US can sink your company. The cost difference is much more manageable and, depending of the product, can often times be overcome by the price of shipping.
[1] https://manufacturingdigital.com/digital-factory/timeline-te...
> The labor cost difference is something like 5% in the China vs 8% in the US.
Those percentages don't make sense to me. 5% and 8% of what? Final assembly? Labor costs are also built into all material costs in the supply chain.
I don't know if you're wrong in general, but your dates for the factory construction show 9 months in China vs 13 months in the US, not the 5 months vs two years you claim.
There's an attitude shift, too. US manufacturing is stuck in the past. If you want to build a widget, you want it finished, welded assembled and painted. you've got to do a bunch of work and take it to four different places before you're done. China's got a one stop shop attitude to get your widget made. https://www.tiktok.com/t/ZTjEVB5p2/