The problem with 'cheap labour'

[Sub]

Please explain to me what is wrong with 'taking advantage' of cheap labour. The people are being employed and they are being paid. Would you rather they be on the streets earning nothing? Obviously if the workers are treated poorly this is a problem, but I doubt in most cases they are. Even if they are, no one is forcing them to work there surely. Isn't this just using comparative advantage to gain benefits for all?

[Christian]

Why are you asking ? Is this yet another media subject ?

I don't have a problem with cheap labour.
If people are dumb enough to work for the peanuts you pay them, it's their problem. Not yours.

I mean, some american companies actually save alot of money by hiring mexicans (Whom speaks American ofc) for their company phone services. Then, when you call the company's support line because something broke, you don't know how this and that works, you'll be transferred to a mexican; whom have been educated about the company's products. From what I heard, these mexicans will gladly do the job for much lesser cash than normal americans.
Personally, I think this is brilliant.

[Vanilla]

Nothing.

People mostly think about Nike and sweatshops when people mention cheap labour.

At the end of the day the labour is cheap to us. Whereas in countries like india, mexico, taiwan and other eastern countries the wage paid by these corporations is not cheap labour but actually well above average in terms of pay.

[Nodrog]

If youre talking about cheap third world labour, the problem most people have with it isnt that the individuals are being exploited (as you rightly point out, they are better off working 'cheaply' than they would be not working at all, or else they wouldnt accept the job), but that the long term development of the country itself is being stunted, meaning it will be slower to develop in the long run. Some people would rather that those countries were left relatively untouched by the West, which may benefit them a lot more over the long term. Saying that people only have a problem with the individuals working for little wages is a gross oversimplification of the situation.

[queball]

Not reasons why cheap labour is bad, but reasons why high wages are good,
- Your employees are also your customers, for example Ford paid his employees highly so they could own cars themselves, thus promoting the product.
- Slaves need to be healthy. Working people too hard for little pay is counterproductive in the long run, you often need to consider your employee's wellbeing.
- Appeasing trade unions. You need to make sure the work can get done after all.

One problem with third world factories is that the employees are badly educated and the conditions are hazardous. Chinese factories where people loose limbs, but are kept from realising this is a danger.

[Sub]

Originally posted by Nodrog
but that the long term development of the country itself is being stunted, meaning it will be slower to develop in the long run.

But surely if it was done 'properly' it would benefit them, as there would be less unemployment, and money would be pumped into the local economy by the firms (assuming they aren't complete ****s). I'm obviously missing something here but I can't spot it.

[Vermillion]

Company A decides to cut their production costs.

So they move their factories to third world country X and set up a manufacturing concern there. In the United States, Minimum wage is $5.50 or so an hour, in country X avaerage wage is 12 cents a day.

Company A pays its workers 13 cents a day, to get the best workers, drawing skilled labour from local business. The labour is never brought into any kind of management or supervisory role, only labour. The products of this labour are shipped off to the West, and the workers never have access to it, thus their labour efforts are being exported, and draining the local economy further.

In theory the Government of Country X could make up for this loss of labour, skills and productivity through massive taxation of Company A, but then company A would leave. Furthermore, in many cases, Company A secures its position and absence of taxation through bribery and corruption. (Coke in the 1980s)

So Country X is losing the production of its most skilled workers, who's labours are entirely for export and who gain no useful skills to return to their own country. The extra penny a day they put into the local economy per worker is so small as to be irrelevant.

Since Country X is trying to grow, the loss of these skilled workers from primary industry, such as heavy manufacturing and agriculture prevents any development, instead you get a population base that knows how to resole a sneaker, but not how to build aquifiers or tractors.

Lastly, Company A, who is saving thousands of dollars per day...
(400 workers in US at minimum wage for a 9 hour day = about 20,000 dollars per day.
400 workers in Country X at 13 cents a day for 11 hours = 50 dollars per day and an increase in work of about 15%. Country X also does not have annoying unions, superannuation, pensions, benefits, retraining programs, daycare and workers compensation.)

...generally turns about 0% of this profit back into Country X.

[Dante Hicks]

Originally posted by Sub
Even if they are, no one is forcing them to work there surely.

In a lot of cases, working in a **** factory is better than rural life. That's how bad rural life is.

But if you look at most serious commentators (e.g. Pilger on Nike in Indonesia) they don't want a boycott of these products because they know this will increase unemployment. They just want better working conditions and no heavy handed duress during employee negotiations, etc. (i.e. not randomly having trade unionists beaten up which is fairly common)

[Kåre Willoch]

Originally posted by Vermillion
Company A decides to cut their production costs.

So they move their factories to third world country X and set up a manufacturing concern there. In the United States, Minimum wage is $5.50 or so an hour, in country X avaerage wage is 12 cents a day.

Company A pays its workers 13 cents a day, to get the best workers, drawing skilled labour from local business. The labour is never brought into any kind of management or supervisory role, only labour. The products of this labour are shipped off to the West, and the workers never have access to it, thus their labour efforts are being exported, and draining the local economy further.

In theory the Government of Country X could make up for this loss of labour, skills and productivity through massive taxation of Company A, but then company A would leave. Furthermore, in many cases, Company A secures its position and absence of taxation through bribery and corruption. (Coke in the 1980s)

So Country X is losing the production of its most skilled workers, who's labours are entirely for export and who gain no useful skills to return to their own country. The extra penny a day they put into the local economy per worker is so small as to be irrelevant.

Since Country X is trying to grow, the loss of these skilled workers from primary industry, such as heavy manufacturing and agriculture prevents any development, instead you get a population base that knows how to resole a sneaker, but not how to build aquifiers or tractors.

Lastly, Company A, who is saving thousands of dollars per day...
(400 workers in US at minimum wage for a 9 hour day = about 20,000 dollars per day.
400 workers in Country X at 13 cents a day for 11 hours = 50 dollars per day and an increase in work of about 15%. Country X also does not have annoying unions, superannuation, pensions, benefits, retraining programs, daycare and workers compensation.)

...generally turns about 0% of this profit back into Country X.

---
This pretty much covers the problems in the third world country. The problem in the united states is that:

1. The people who should buy the products are out of a job, because all their greedy companys have set up production facilities abroad. Finding a market gets harder, so in the end you have american owners producing stuff cheap in the third world, and selling it wherever in the world it can be sold, while america itself decays.

2. Differences between the have and the have not's increase, chances are more and more people get desperate and simply kill some rich factory owner to take his money, or in more general terms, you get a more violent society as people have less opportunities and get more desperate.

3. In the long term a larger and larger proportion of the population gets unproductive. There are no jobs, and starting new ones to compete with the third world factories is hard.

4. At some point the reign of America will end, bacause of it's blind belief in the religion of capitalism.

5. Somebody deletes my account for coming up with this bollocks.

[sayonara]

I don't know about cheap labour, but the problem with expensive labour is that it's like cheap labour but costs more.

[acropolis]

costs the original country a bunch of jobs i guess.

and sometimes they beat and abuse their foreign workers, or use slaves. which ain't cool.

i always thought of the effect on the other country as positive though. south korea, hong kong, taiwan, etc. all got 'cheap labored' into the first world (at least that was the impression i had).

[G.K Zhukov]

Originally posted by Vermillion
good stuff

yup.
Now, this cant go on forever. Becouse there wont be enough people who can buy the products in the end.
todays capitalism already sees this problem, ie: overproduction and to much capital who cant be invested, couse there isnt anything to invest at (so its used in speculation in currency and bonds).

[Bunga]

Originally posted by acropolis
i always thought of the effect on the other country as positive though. south korea, hong kong, taiwan, etc. all got 'cheap labored' into the first world (at least that was the impression i had).

Not really. They just used protectionism in a way unheard of before to get ahead of everyone else. Unfortunatly, the "Asian Tiger" syndrome is not contagious, ie if other countries started doing the same thing, it wouldn't work. Normally if you start protecting your domestic industry, other countries protect against you, but in this case they were spared this for various reasons.

[wu_trax]

not sure if anyone said that yet, but cheap labour ruins the own economy:
if you let the market decide about the balance price (i.e. price with full-employment) it wilol not only effect those people who dont have a job (they might evntually even be better off) but also those who do already have a job and have to accept that new lower price. (this increases the profit rates for the employers).
BUT those people who now earn less are not able to create the same demand they did before, and employers are more likely to invest / safe their money.
this means the demand is lower than before, which menas the companies have to lower their prices, which means less profits, which means reduction of costs, which means less jobs,which means less demand, lower prices ,etc.

edit: sorry, i didnt read the thread, i thought it was about minimum wages :/
but the theory works even better with 3rd world countries, because these companies who import goods from 3rd world countries dont create any demand in the own country (besides its increased profits) which means sooner or later people in that country dont have enough money any more to buy these goods

Depends on wich party you side with. From a corporate view, importing cheap labour, or as many of the real big companies does, moving industry out of high cost countries, saves millions each year, giving them the edge. The quality is not lower, just the costs.

Living in a rich country with high taxes, both for individuals and companies, I'm sure someone could do my work for less money and be happy about it, but I'm 'protected' by our government so that I can make money and still don't be afraid of loosing my job.