Is a Chinese Worker Cheaper to Employ than a Slave in America? or Why We Need an International Manufacturing Minimum Wage

Are Chinese Laborers Cheaper to Employ than a Slave in America? Or, Why We Need an International Minimum Wage of at least $3 an Hour.

Intrusive Authorial Note:

Of course, slavery was abolished long ago in the United States and I totally abhor slavery. I use it as an extreme example here to point out the fact that wages are so low in China that they have a destructive effect on our economy similar to the slavery which helped destroy the middle class of Rome. Instead of outsourcing, wealthy Romans took middle class jobs away by having slaves that did the same work, and thus undermined Rome's economy by throwing the middle class out of work. I am using slavery only as a tongue in cheek example of how we will never be able to compete with Chinese labor, (read India, Taiwan, etc. labor and all loosely referred to herein simply as China).

For years, manufacturing jobs have been leaking away to China. There is no economic incentive for any single US consumer or any single US manufacturer to buy American or keep jobs in our country. The people who shop at Wal Mart do so because they offer the best price. The people moving jobs to China do so because they can’t make things cheaply enough in America to sell at the low price Wal Mart shoppers demand. While this makes perfect, rational economic sense on a micro level, it makes no sense at all when it comes to the survival of America on a macro level.

Prior to the Presidential election there was a lot of debate about bringing jobs back to America. Everyone agrees the middle class is slipping away and we are becoming a nation of rich and poor. Now President elect Obama has to come up with a way to do this. Can he do it? How will he do it? Is there some way that the driving force of Capitalism, essentially, self-interest on a micro level, which so far has worked on a macro level to take jobs away from Americans, be harnessed to achieve this goal? Yes, there is, using a pro-trade tariff system, combined with a mandatory international manufacturing minimum wage. Why and how does this work? Read on.

A simple way to get jobs back to America would be to lower American wages until they are competitive with Chinese wages. Then jobs would come flooding back into our country and we could all say, “Booyah! Mission accomplished!”

This is a simple and appealing argument, (especially when we hear about those guys in Detroit who are getting $70 plus an hour). Surely, if US workers would agree to work at a more reasonable wage, we could get manufacturing jobs back into this country.

Is it possible? Let’s start at the lowest pay scale possible and see if American labor can compete with Chinese labor. I can’t think of a pay scale cheaper than nothing, i.e., slavery, so let’s look at the cost of making something in America with slave labor and see if that could be competitive with Chinese workers. If not even slaves in America could compete with Chinese workers, then obviously, something else will have to be done to bring jobs back to America.

So, how much do those industrious Chinese workers get paid?

According to payscale.com, the average factory worker in China makes 15 Chinese Yuan an hour. And the Yuan is worth 15 cents. So the hourly wage of the average manufacturing worker in China is $2.25 an hour. That’s $390 a month.

(With an eight hour, five day, work week and 4.33 weeks a month on average, a Chinese factory worker is paid at least: $2.25 X 8 X 5 X 4.33 = $390 per month. Maybe more if he works six or seven days, but we’ll assume the same as an American work week. )

Even $390 a month might be too high, there are many reports that workers living in dorms and eating free company food work for $100 a month in China. But let’s assume that payscale.com has it right and that there’s also no added perks to this wage like health insurance or accident insurance.

$390 a month is very competitive with a US minimum wage worker. Current Federal minimum wage is $6.55 an hour, soon to go to $7.25 an hour in July, 2009. Even at $6.55, that’s a horrific $1135 a month in the US, almost three times the cost of a worker in China! No wonder so much stuff is made in China. But since we’re trying to compete, let’s see how slave labor compares to Chinese labor and once we find out if that is competitive, we can ratchet up those wages until American factories are humming once again!

A slave has two cost components, initial cost and maintenance. To analyze the monthly cost of purchasing a slave, you have to compare what is called the opportunity cost of your money of buying a slave to the return you’d get from a safer investment, like putting that money into a CD in a bank at 3%. That tells you what that slave is really costing you to buy on a month to month basis over the long haul.

What would a slave cost today in America? Well, we can use the price of a slave in 1800 in America and adjust for inflation. According to the website below, in 1800, the average adult male slave cost $381.

http://eh.net/Clio/Conferences/ASSA/Jan_00/rosenbloom.shtml

(It’s interesting to look at inflation as a side note, because it turns out there really wasn’t any inflation between 1800 and 1971. But in 1971 we went off the gold standard and now prices are at least 10 times what they were in 1971, according to:

http://mwhodges.home.att.net/inflation.htm#1800)

So the inflation adjusted cost of a slave in 2008 would be $3,810. At a 3% opportunity cost, that’s roughly $120 a year or $10 a month. We are certainly off to a good start here! That’s way under those pesky industrious Chinese. We’ll have jobs back in the good ol USA before we know it!

Ahh, but don’t forget slave maintenance. Things that pop to mind are food, shelter, water, utilities and some sort of shabby but adequate medical care. Speaking of medical care, there’s nothing like the wonderful free emergency room system we now provide our minimum wage workers! No sir, America is top notch medically speaking. If you have a cold in Sweden, that’s a free doctors visit. By golly in America, if you have a cold, that’s an emergency and you just have to wait in line behind the other emergencies like heart attacks or crash victims. But you wait those long hours with a certain sense of respect for your malady. It’s an emergency!

We’ll look at the medical costs later, first the slaves need to eat.

Food: I don’t think a person can live on less than 2,000 calories a day, and even if that were rice and beans, I can’t imagine food costing less than 50 cents a meal because food is not cheap in America. So, 500 calories a meal, 4 meals a day, $2 a day for food, $60 a month. Wow, food must be more expensive in America than China!

Shelter: Despite the recession, housing is still expensive in America. You can’t get much cheaper than a tent from Wal Mart, that runs about $200. But it wouldn’t last more than a year with a family of four running in and out, so figure $25 a year per worker, $2 a month for a tent.

And you’d have to allocate some land for this purpose. In America about the cheapest land you can find is still $3,000 an acre, so figure adding in a septic field for waste and a well, you’re going to have to put each slave tent on at least a twentieth of an acre of land., so about $150 for the land, but that septic and well gets expensive fast, probably a good $20,000 total for 20 families, so $1,150 for land and utility system per slave, and since this is a capital expense, it represents an annual opportunity cost of $35, a cost per month of $3.

So far so good, we’re only at $75 a month and headed down the home stretch!

Utilities: We won’t need heat or cooling, because tents are not useful in cold climates, we’ll have to have all our jobs somewhere warm, but not too warm because tents get hot at night. Somewhere south of Ohio but north of Louisiana can become the new slave belt, a perfect replacement for the rust belt!

But don’t forget garbage hauling. Now that’s expensive. All municipalities have contracts with garbage haulers and our intention here is to bring more jobs to America, not take them away, so I’m afraid that if my garbage costs me $80 a month for a family of 4, we’re going to have to allocate about $20 a month per worker for garbage hauling alone.

So far we’re at a cost of $95 a month.

Now, medical care. Obviously we again are not going to be able to use a slave doctor, because that would cut into doctor jobs. Same problem as slave garbagemen, no way. My extremely healthy daughter who is 20 and fit as an antelope pays $300 a month, and that’s cheaper than what I pay. Oh oh, I’m getting a bad feeling about this whole slave idea and cost cutting, but I want to be realistic. With medical care we’ve jumped to $395 a month.

Oh, and her plan doesn’t include pharmacy coverage. Again, we can’t cheat the pharmaceutical companies out of their due, after all, only with profits in the billions can you invent new drugs. What’s reasonable here? Well Viagra costs about $100 a month, or so I’ve been told. Figure that half the men would have no interest in sex after a hard day of 8 hours slaving away at their jobs, (literally), and you need them to be interested in sex to keep the slave supply up, so $50 a month for medicine, minimum, per worker.

Grand total, $445 a month. That’s discouraging, but wait, maybe shipping costs need to be added in here and having slaves in America would still be profitable!

Oops, I forgot payroll taxes. Payroll taxes? Why? They’re not getting paid! But according to IRS worksheet 437-A, subparagraph 3, “Compensation includes lodging and travel costs when you’re not on the road.” Frankly, I can’t imagine someone less on the road than a slave, after all, that’s the whole point of slavery, it’s the most awful be loyal to your employer program ever invented by humans! So, taxes will at least run 15% for Social Security and Medicare on the $445 a month, so about $70 a month and we’re up to, let’s round it to $515 a month.

But the whole idea of slavery is that it’s not voluntary, so you need to book some cost for keeping the slaves from rebelling.

Who is willing to do this awful work? Well, with Iraq winding down I’m sure such people are a bargain from Blackwater, but how long will that last? They make $100,000 a year because being mean is not a low cost job skill, so $12,000 a month. Probably take four of them to handle 100 slaves, boy this is getting expensive, that’s $48,000 a month or a whopping $480 a month per worker! Sheesh, that number alone is higher than the Chinese worker! Boy, it doesn’t look like we can compete with China, even with slave labor!

Maybe we can sharpen our pencil. What if the Blackwater guys agree that they’re not getting shot at like Iraq. Maybe they’ll work for half pay, something like $240 a month a slave? I know this seems like a lot. Maybe there’s some kind of pharmaceutical invention, that would make it easier to keep a slave. They could call it HappYSlave, kind of a cocktail of Zoloft for happiness, Prilosec for that excess stomach acid caused by stress in the workplace, Viagra, the whole need more slaves thing, and THC to make a worker tranquil. (I’m going to trademark that tomorrow, that’s the capitalist way isn’t it?)

Wait, this isn’t going to work, the drug companies would make this so expensive, it’s a new drug on patent after all, it would probably be cheaper to hire those Blackwater guys at half price.

OK, assuming cut rate slave guarding, we’re up to $755 a month, and now that’s almost double the $391 a month worker in China. How the heck are we going to bring jobs back into America by paying wages to American workers that compete with those paid the Chinese?

And I haven’t even begun to add in costs like:

Polluting in America: There are heavy fines for polluting in America. In China there are no pollution laws. If you want to turn a river into a toxic waste pit that glows in the dark in China, they tell you to pick a color and then say, go right ahead! No one seems to care except the peasants who can’t figure out why their crops are dying, but what the heck, they have no power and other peasants in other places can grow the food.
Slave Owner Therapy: Personally, I’d feel guilty as a slave owner even if I was saving America’s economy and the American worker Booyah! I’d probably spend thousands of dollars at the therapist. Almost impossible to quantify along with pollution but it’s just another ill wind blowing over this program which I have realized can be called:

JOBS AMERICAN WORKERS SLAVERY!!

Or JAWS for short!

Miscellaneous: There’s always a miscellaneous in any budget, clothing, gas to and from the doctors, eyeglasses, Christmas Hams, Easter Hams, Birthday Hams, (consistent gift giving is the corporate ideal).

So, a slave in America would run about $755 a month, and a Chinese worker is happy as a clam at $391 a month. (We assume that clams are happy, I personally don’t know.)

The sad fact is, it just costs too much to do business in America. There’s no way around it, the cheapest labor we’re ever going to have under the JAWS program, which is FREE SLAVES! would still cost an astounding double the Chinese worker.

Well, if we can’t compete with the Chinese labor, how are we going to bring jobs back and rebuild the middle class! Is Obama sure he wants this job? It sounds impossible.

Actually, there is a simple way, and it would get the Chinese worker on the side of the American worker, and it would improve life in China and America and create a new era of prosperity.

We need to enact trade laws that level the playing field. It’s ok to have free trade, however we need a law that says:

ANY COUNTRY SELLING A PRODUCT TO THE UNITED STATES HAS TO HONOR A NEW INTERNATIONAL MINIMUM WAGE LAW FOR MANUFACTURING WORKERS, A WAGE OF $3 AN HOUR, AN 8 HOUR WORK DAY, A 40 HOUR WORK WEEK, A 50 WEEK YEAR.

If a country doesn’t pay its workers at least that much, then we simply add a tax, it’s called a tariff and the Federal Government collects it. It is a charge added to the product price so that the product being sold into America would have a price equivalent to the price it would have if factory workers were paid $3 an hour. And we can spend the entire tariff on feeding, housing and medically taking care of our own laid off workers.

Why not? If the Chinese are going to take away our jobs, we should at least benefit from their being willing to work for us. Right now that cost difference goes into the pockets of the wealthy slave owners, err.. I mean business owners who have outsourced jobs to China.

Wait, does that mean that outsourcing is the same as having slaves? Yes, almost, except it’s even better, because you couldn’t pollute in America if you had slaves, and you don’t need to feel guilty about outsourcing like you would with slaves because the Chinese workers are free. So really, outsourcing is better for business owners than slavery! It’s cheaper and you can sleep at night while breathing clean air and drinking clean water. It’s just catastrophic for the average middle class factory worker and as a result, the entire US and then World economy.

Some free trade people will say that tariffs are anti-trade, and all that happens with tariffs is that the other country retaliates and doesn’t buy the stuff you make. For one thing, most other countries do that to us now anyway so it’s a specious argument. We don’t sell many cars in Japan because they won’t certify them. We don’t sell beef in Korea even though it’s cheaper because the people there want to protect the farmers.

Besides, this tariff is different. It’s not just a stick. It has a carrot for the average Chinese worker—higher wages for the same work!

Instead of retaliating and not buying stuff from us, the Chinese worker will get paid more for his labor, have more to spend, and possibly will end up buying more from America, not less, so that this tariff is a pro-trade tariff.

And don’t forget, now that an American worker will have his job back, he’ll be able to buy more goods from the Chinese. Everyone benefits! Even the slave owners… business owners.

What will happen if these laws are enacted? Very quickly, the Chinese workers will demand that they get paid their $3 an hour. They’ll say it makes no sense to have a tariff going to idle Americans when they could be making more money.

Their leaders will have to agree, and so will big business since they can’t just stop making things in their shiny new factories in China. Nope, profits will simply drop, and Chinese workers will make more money. But how does that help the American worker?

At some minimum wage in China, (and I don’t know what it will have to be, maybe more than $3 but that’s a good start), there will be no advantage to make some products in China any longer. New factories and jobs will come back to this country because shipping will be cheaper or quality will be better or they find that advertising made in America sells more goods.

With this basic underlying structure of a foreign minimum wage for manufacturing, and then tinkering with the number, we’ll bring jobs back to America until we’re at full employment, which should be the purpose behind this entire exercise. America’s economy drives the world’s economy. Only when America is at full employment does the rest of the world benefit to the maximum.

Now, if we get to the point that we have full employment, and find we’re getting cost inflation because we can’t keep up with demand, we can always reduce the Chinese minimum wage level we enforce. That way, American jobs and full employment in the US comes first, not the bottom line of businesses, but the bottom line of America, which has to be full employment. It’s fine that we’re the superpower policeman of the world and our markets drive the world economy, but the one thing we have a right to insist on is full employment in America for carrying those dual burdens.

Capitalism is a way of people behaving in their own self interest. But sometimes countries need to do things on behalf of their citizens so that the good of all, in this case full employment in America, comes about.

Will this be bad for China? I don’t think so. Employed Americans will buy more stuff, both made in America and China. In the end, businessmen will find they are making larger profits, because in the end, everyone will have a relatively good paying job. You can imagine how higher wages would help the Chinese economy.

And what about the future when robots become prevalent? If we don’t enact full employment laws now, someday the wealthy will own robots that don’t need medical care or food. On that day even the Chinese, if we don’t pass laws that prevent it, will find themselves out of work.

Who will business then sell products to when the whole world is unemployed? To the robots that don’t buy anything? This is the future, and beyond that future, we will some day have the Matter Replicator from Star Trek. You just stand by it and press some buttons and voila, new shoes are made from carbon and hydrogen and oxygen.

Who will own the Matter Replicator? It better be everyone, or someday, we’ll all be slaves.