Tuesday, June 7, 2011

Would you rather have an economy with 100 people making $11,620 per year or one with 50 people making $53,591? If you own an I-Pod you have already chosen your answer...

Source: Carpe Diem
 This graphic is from Carpe Diem. I encourage you to go there and read the analysis.  I just did some back of the envelop calculations comparing the average wage paid to US workers vs "foreign" workers.

The inputs to that go into making an I-Pod are sourced from many parts of the world, with the final assembly is done in very large Chinese facilities. According to the graphic, the wage paid per US job is $53,591 ($746M/13,920).  The wage paid per foreign job $11,670 ($318M/27,250).  The US has half as many jobs devoted to the production of the I-Pod but each of those jobs pays 4.6 times as much ($53,591/$11,670) as each foreign job. 

On a per-job basis, why are US workers paid so much more?  You have to look at the types of jobs AND worker productivity:
""When innovative products are designed and marketed by U.S. companies, they can create valuable jobs for American workers even if the products are manufactured offshore. Apple’s tremendous success with the iPod and other innovative products in recent years has driven growth in U.S. employment, even though these products are made offshore. These jobs pay well and employ people with college degrees. They are at the high end of what might be considered middle class jobs and appear to be less at risk of vanishing from the United States than production jobs." Source: Innovation and Job Creation in a Global Economy: The Case of Apple’s iPod

Dr Perry's comment: ""Part of the current and future strength of America’s manufacturing sector could be explained by the global shift in manufacturing that has leveraged the relative cost advantages of shifting low-end production and assembly to low-wage countries like China, while advanced economies and companies in the U.S. like Apple have increasingly specialized in the research, design and marketing of products like the iPod. China’s focus on labor-intensive, low-skill, and low-value-added assembly of manufactured goods has allowed America to become even more competitive in the higher-end, higher-skilled manufacturing design and engineering in areas like electronics, aerospace, pharmaceuticals and medicine, industrial machinery, medical and scientific equipment and supplies, computers, software and semi-conductors, and oil and natural-gas equipment.

"" The case study of Apple's iPod illustrates the reality that U.S. manufacturing in the 21st century will be increasingly focused on the high-tech, high valued-added, high-skilled, research-intensive, high-paying aspects of manufacturing, with the production and assembly taking place elsewhere. U.S. manufacturing is alive and well, it's just strategically shifted higher up the value chain.""
View My Stats