Why are Bangladesh,Indonesia & Vietnam replacing China for cheap labour?

April 27, 2013 4:31 PM

And where can I read more about the economics of the cheap labour industry?

Can anyone recommend me any materials or bloggers who provide a good overview and analysis about this topic?

Thank you

posted by ethelwulf to Society & Culture (8 answers total)

I buy electronics products from China. Most of the production for our products is done in the Shenzhen area of Southern China (Guangdong Province). Every year after Chinese New Year when year end bonuses are distributed, there's a huge labor turnover problem. I've been told the labor shortage is getting worse and worse every year. Many of these migrant workers are either refusing to do tedious factory work any more or they are finding work closer to home in other provinces. Our major supplier has a factory in Vietnam for production of commodity products. I presume the wages are lower there, but I've also heard that the labor force is more stable there (I'm not sure if it's because they don't have a year end bonus system (maybe they do have that), or if it's a cultural thing or some other reason). As for Indonesia, well companies like Nike have been making shoes there for a very long time, and Bangladesh has always had a lot of production of garments. I don't know those industries like I know electronics, but producing those items there is nothing new. But production of some electronics items in Vietnam is fairly new (although big Japanese electronics manufacturers have had factories in Vietnam, Thailand, Indonesia, etc. for a long time).
posted by Dansaman at 4:37 PM on April 27, 2013 [2 favorites]

Overdressed: The Shockingly High Cost of Cheap Fashion is all about the economics of cheaply made and sold clothing. One chapter is, in fact, about the transition of clothing manufacturers from China to Bangladesh. Her analysis is missing some pieces, imho, but I still learned a lot.
posted by ActionPopulated at 7:03 PM on April 27, 2013

I think China is trying to specialize in manufacturing and electronics manufacturing. And, China is a richer nation than the poorer Pacific Rim nations. China's workers might demand a dollar an hour, while the poorer workers only demand a dollar a day.
posted by gjc at 7:14 PM on April 27, 2013

It's true that there is wage inflation in China, and there are various reasons for that, including competition for hiring workers and inflation in the general economy (due to an artificially low currency exchange rate that raises the costs of imports, rules and corruption that lead to loose money, including from banks, being invested unwisely, a lack of investment access outside of China, a speculative fever in the stock and housing markets, etc.).
posted by Dansaman at 7:55 PM on April 27, 2013

Let's not forget how there is such a big movement to stop Americans from buying products made in China in the recent years. The move to another country means that the American companies are able to sell more products that are produced at comparable rates and time constraints but when you look at the label, it doesn't say Made in China.
posted by Yellow at 9:02 AM on April 28, 2013

It became cheaper to move the orders for garments (etc) from China to somewhere else and do business there than it was to keep making them in China. Eventually, the workers in the new place (Bangladesh, for example) will demand better pay and working conditions, so it'll become cheaper to move from there to somewhere else... and the cycle continues.
posted by 2oh1 at 12:49 PM on April 28, 2013

Joerg Wuttke, a veteran industrialist with the EU Chamber of Commerce in China, predicts that the cost to manufacture in China could soar twofold or even threefold by 2020. AlixPartners, a consultancy, offers this intriguing extrapolation: if China's currency and shipping costs were to rise by 5% annually and wages were to go up by 30% a year, by 2015 it would be just as cheap to make things in North America as to make them in China and ship them there (see chart). In reality, the convergence will probably be slower. But the trend is clear.
posted by jason's_planet at 4:02 PM on April 28, 2013

Why are Bangladesh,Indonesia & Vietnam replacing China for cheap labour?

are they? especially since you're also looking for more resources, maybe you should wait to see if it's at all true before asking why. so, my answer to your question is: maybe those countries are not. there could be a few definitions of what you mean by "replace", you should try to get a more focused question too.

that said: China entered the WTO in 2000. since then there was a migration to there from other countries, and now we might be seeing a leveling out to a more stable distribution of manufacturing.
posted by cupcake1337 at 9:25 PM on April 28, 2013