Appendix B - Driving Forces for Globalization

APPENDIX B ~ DRIVING FORCES FOR GLOBALIZATION ~

Updated 11/1/08, 02/21/04 and 08/22/11)

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[A]~Developing World as a Whole, [B]~Latin America, [C]~Asia, [D]~Africa

Table (B-1) ~ Average Hourly Labor Costs for 1990
Table (B-2) ~ Relative Labor Costs Among Major Auto-Producing Nations in dollars/hour (~2004).
Table (B-3) ~ Productivity, Wages and Unit Labor Costs Relative to the US, Total Manufacturing, 1990.
Table (B-4) ~ Some Gross National Incomes per capita in 2000 (US dollars/ year)
Table (B-5) ~ Korean Average Monthly Wage for Manufacturing Employees

The U.S. Bureau of Labor Statistics published a document with a section titled "International Labor Statistics" This document includes data for 35 countries. Below are some examples:
Brazil – Manufacturing labor in 2009
Hourly compensation costs $8.32 = ( pay for time worked ($4.45))+ (directly pay benefits ($1.18))+ (insurance/ taxes ($2.70)).
India – Organized Manufacturing Sector
Production workers in 2007 earned $0.77/ hour.
South Korea -- Manufacturing labor in 2008-2010
Hourly compensation costs $14.20 = (Hourly pay for time worked $11.68)+(Insurance/taxes $2.52)
Philippines -- Manufacturing Sector in 2008-2010
Hourly compensation costs ($1.50) = (Hourly pay for time worked $1.13)+(Direct pay benefits $0.25)+ (insurance/ taxes $0.13)
Mexico -- Manufacturing labor in 2008-2010.
Hourly compensation cost ($5.38) = (Hourly pay for time worked $3.93)+(insurance/ taxes $1.45)
France -- Manufacturing Sector 2009
Hourly compensation costs($40.08) = (Hourly pay for time worked $22.58) +(Hourly direct benefits $4.94) + (Insurance/ taxes $12.51)

Table (B-1) ~ Average Hourly Labor Costs for 1990 (from a chart) (Institute of German Industries data) (92R1)

Country	Wages (DM)	Total (DM)	Total ($)
W.Germany	20	38	23.6
Italy	14	30	18.6
Japan	20	26	16.1
France	13.5	25.5	15.8
Britain	17	25	15.5
US	17	24	14.9
Spain	13	22	13.6
Greece	6	10	6.2
Portugal	4	7	4.3
S. Korea	4.5	6.5	4.0
Taiwan	5	6	3.7
Singapore	3.5	6	3.7
Brazil	3	5	3.1
Turkey	1.5	3.5	2.2
Mexico	2	3	1.9

Table (B-2) ~ Relative labor costs among major auto-producing nations, in dollars per hour (Source: U.S. office of Trade and Economic Analysis) (04S1)

Germany	$33.00
U. S.	$22.50
France	$22.10
Japan	$20.20
Canada	$19.40
U. K.	$18.60
S. Korea	$ 8.40
Taiwan	$ 5.20
Mexico	$ 2.70
China	$ 0.90

Table (B-3) ~ Productivity, Wages, and Unit Labor Costs relative to the US, total Manufacturing, 1990 ~ (96G1) (from a chart)

Country	Product- ivity	Wages	Unit Labor Costs
India	0.05	0.05	1.05
Philippines	0.07	0.08	1.1
Malaysia	0.10	0.10	1.0
Mexico	0.25	0.20	0.7
S. Korea	0.50	0.4	0.7
Japan	0.85	1.0	1.15
US	1.00	1.0	1.00

Comments: Unit Labor Costs = Wages/ Productivity.

Table (B-4) ~ Some Gross National Incomes per capita in 2000 (US dollars/ year)

Bhutan	590	Nepal	240	Cambodia	260	Viet Nam	390
Thailand	2000	Lao PDR	290	Sri Lanka	850	Bangladesh	370
Maldives	1960	Tajikistan	180	India	450	Cuba* #	480

Source: United Nations, World Urbanization Prospects: The 1999 Revision (1999)
# Gershon Fishbein, Pittsburgh Post Gazette (1/12/03).

[A] ~ Developing World as a Whole ~
Median per-capita income is under $2/ day (under $730/ year) (Ref.11, 25 and 26 of Ref.(00S1)).

[B] ~ Latin America ~

Wages for coffee bean pickers have fallen, along with coffee prices, to below US$1-2/day in many Latin American countries (01O1).
Cuban workers earn an average of $40/ month (03F1).
The minimum wage in Chile’s salmon industry is $190/ month. Labor standards are rarely enforced. (Anton Daughters, "Salmon industry changing culture (Chile)", The Tucson Citizen, (8/3/04).).

[B1] ~ Latin America ~ Mexico ~

Minimum wage is $0.50/ hour. In one US auto plant in Mexico, the workers went on strike. The Mexican police shot several and put the strikers back to work—and cut their wages 45%.

In order to persuade Ford Motor Co. to produce Ford Fiestas in a Ford (assembly?) plant outside Mexico City (involving 4,500 jobs), union leaders offered a two-tier hiring scheme. Wages for new hires would be reduced to about half of the current wage of $4.50/ hour ((Unknown) "Unions agree to wage cuts," Pittsburgh Post Gazette (6/5/08) p. A4.) Comments: Two-tiered wage scales are becoming common, even in the developed world.

Workers in the Tijuana (in Mexico) maquiladoras (usually manufacturing facilities) are paid about $0.50/ hour. This is less than before NAFTA was passed (Sierra, July/ August, 1997).

Mexican auto industry wages and benefits average $4.00/ hour, vs. $30/ hour in the US (92L1).

Average wages in Mexico’s export-oriented maquiladoras sector are $1.73/ hour, vs. $2.17/ hour in the Mexican economy as a whole (92L1).

Real wages in Mexico were less in 1999 than in 1980. This is despite NAFTA and despite some 4000 maquiladoras plants employing over one million Mexican workers (99C1).

Labor productivity in Mexico’s export industries is typically 80-100% of US levels, while wages are 10-15% of US levels. The Mexican government used armed forces to intimidate workers and establishes business associations to fix wage rates, which are kept low to attract foreign capital. NAFTA provides more incentives for US businesses to train Mexican workers than American workers (Jeff Faux, Pittsburgh Post Gazette (9/8/93)).

Despite seemingly low wages and wretched conditions, Mexico is losing garment assembly jobs to Central America, call centers to Argentina, data processing to India, and electronics manufacture to China (03M1). Mexico has nearly lost the battle on low-skilled, labor-intensive industries according to Merrill Lynch’s Latin American specialist Robert Berges. Two of Mexico’s original advantages – low labor costs and cheap currency – are gone according to the head of General Electric Corp’s Mexico operations (03M1).

Maquiladoras in Major Municipal Areas of Mexico’s Part of the Rio Grande Basin (02K1)

Area	Year	Plants	Employees	Year	Plants	Employees
Juarez	1980	121	42,412	2000	312	255,740
Cd. Chihuahua	1980	19	4,415	2000	85	52,722
Matamoros	1980	50	15,314	2000	38	14,475
Piedras Negras	1993	42	9,122	2000	38	14,475
Cd. Acuna	1992	50	18,615	2000	57	32,289
Nuevo Laredo	1993	54	16,418	2000	55	22,050
Reynosa	1993	78	34,258	2000	122	64,877
TOTALS	- - -	414	140,554	- - -	*707	456,628

* There are now almost 3000 maquiladoras in Mexico, employing close to 1 million people (02K1).

[C] ~ Asia ~

[C1] ~ Asia ~ China ~

The average factory wage in China is about $0.40/ hour (02I1).
Two thirds of China’s people live on less than $1/ day (02I1).
Market rate for unskilled labor: $0.60/ hour (02W1) (The article notes that China’s supply of unskilled labor is essentially infinite.)
Skilled workers in China earn $100-$150/ month for 50-65 hours/ week. Unskilled workers get $50-70/ month (presumably for same hours) (Joseph Periera, Wall Street Journal (5/28/93)).
Fed by over-investment, China has built up a glut of manufacturing capacity so huge that China could produce nearly twice what it does. China sold $150 billion of goods abroad in 1996, almost as much as Malaysia, Thailand, the Philippines and Indonesia combined. Chinese unemployment is rising (Joseph Kahn, Wall Street Journal (7/14/97)).
The average income for a rural resident (population: 700 million) in China is $286/ year (03W1).
The income of China’s farmers in 2002 was 2470 yuan (US$298). Average income of urban residents: 7500+ yuan (US$906) (03U1).
As many as 30 Chinese workers can be hired for the cost of one cabinetmaker in North Carolina (04M1).
Japanese companies can hire three Chinese software engineers for the price of one in Japan (Thomas L. Friedman, "Doing our homework", Pittsburgh Post Gazette (6/25/04)).
In China, starting salaries for call-center operators is $90/ month (Thomas L. Friedman, "Doing our homework", Pittsburgh Post Gazette (6/25/04)).
The minimum wage in factories along China’s coast is $50-$70/ month (04C1). However many of China’s employers pay less than the minimum wage and require more than the 49 hours of work per week permitted by Chinese law. China’s enforcement of its labor laws is lax (04C1).
The average American wage is about $135/ day. The average Chinese wage is around $135/ month, for working 14-16 hours per day, 7 days per week, often under harsh, sweatshop conditions. Some Chinese factories pay $50 to $80/ month. For political stability, China needs 15-20 million new jobs/ year (07M1).
Manufacturing employees averaged $0.57/hour in 2002. (Judith Banister, "Manufacturing earnings and compensation in China," Monthly Labor Review (August, 2005).

[C2] ~ Asia ~ India ~

Software development in India costs $15-$20/ hour including the cost of the hardware, software and a satellite link. Compare this with $60-$80/ hour in the US (94C1).
India’s per-capita economic output is less than $500/ year. India’s middle class generally earns $100/ month (93B1).
Foundry workers in India earn $1 for working an 8-hour day (03K1).
Call center workers in Newcastle (in the UK) earn $27,110 - $30,500/ year – roughly 10 times as much as their counterparts would make in India (03V1). High school dropouts man Newcastle call centers, whereas college graduates man India’s call centers. (Unemployment in India is around 25% (03V1).)

[C3] Asia – Indonesia

Workers went on strike in May 1997 for an extra 20 cents/ day that would give them $2.46/ day as mandated by the new minimum-wage law. Nike suggested that Indonesians were pricing themselves out of the labor market ($2.46/ day covers 90% of the basic subsistence needs for one person (97B1).
Per-capita GNP in Indonesia: $880 (97O1).
Minimum wage (US dollars) is $2.46/ day (Wall Street Journal (6/4/97)).
Indonesia’s labor force grows by 2.5 million workers per year (93B1).

[C4] ~ Asia ~ Japan ~
The market rate for unskilled labor is $25/ hour (02W1).

[C5] ~ Asia ~ Korea (South) ~

Table (B-5) ~ Korean Average Monthly Wage for Manufacturing Employees (dollars) (Bank of Korea data)

YEAR	1987	1989	1991	1993	1995	1996
WAGES	400	750	1000	1100	1500	700

A survey by the Korea Traders Association of 460 foreign buying offices in South Korea found that two-thirds plan, within two years, to change their partners or shift their bases to China and Southeast Asian Countries, which can provide less expensive goods (Wall Street Journal (9/26/91)).

[C6] ~ Asia ~ Korea (North) ~
Pay of workers averages about $45/ month. (Damon Darlin, Wall Street Journal (5/12/92)).

[C7] ~ Asia ~ Malaysia ~
The market rate for unskilled labor is $2.50 / hour (02W1) (probably in 2002).

[C8] ~ Asia ~ Singapore ~
The market rate for unskilled labor is $5.00/ hour (02W1) (probably in 2002).

[C9] ~ Asia ~ Vietnam ~

Wages for factory work: $1/ day or less (93B1) (probably in 1993).
Vietnamese Nike workers earn $1.60/ day, while three simple meals cost $2.00 (97B1) (probably in 1997).

[D] ~ Africa ~

[D1] ~ Africa ~ Madagascar ~

Wages are less than $0.40/ hour. Forced overtime is a prevalent practice (Helene Cooper, Wall Street Journal (1/2/02) (probably in 2002).

Wages for coffee bean pickers have fallen, along with coffee prices, to below US$1-2/ day in many African countries (01O1) (in 2001).

APPENDIX B ~ REFERENCES ~

92L1 Karen Lissakers, Wall Street Journal (11/19/92).
92R1 Terence Roth, Wall Street Journal (1/29/92).
93B1 Marcus W. Brauchli, Wall Street Journal (4/7/93).
94C1 Steve Creedy, "India Becoming Software Mecca", Pittsburgh Post Gazette (12/7/94).
96G1 Stephen S. Golub, "America-Firsters Have It Backward", Wall Street Journal (1/16/96).
97B1 Medea Benjamin, letter to the editor in Wall Street Journal (6/4/97).
99C1 Center for Immigration Studies, and US Department of Labor, Bureau of Labor Statistics, Office of Productivity and Technology, "Five Years After NAFTA, Rhetoric and Reality of Mexican Immigration in the 21^st Century" (May 1999).
00S1 J. Joseph Speidel, "Environment and Health: 1. Population, Consumption and Human Health", Canadian Medical Association Journal, 163(5) (9/5/00) pp. 551-556.
01O1 Oxfam, "Bitter coffee: how the poor are paying for the slump in coffee prices", Oxford, UK (2001).
02I1 Evelyn Iritani, Marla Dickerson, "China to be world’s factory", New York Times, (appeared in Pittsburgh Post Gazette on 11/24/02).
02K1 Mary E. Kelly, "Water Management in the Bi-national Texas/ Mexico Rio Grande/ Rio Bravo Basin", in Karen Krchnak, editor, Human Population and Freshwater Resources: U.S. Cases and International Perspective, Yale University, New Haven (2002) 177 pp.
02W1 Peter Wonacott, Wall Street Journal (3/14/02).
03F1 Gershon Fishbein, "Cubans give health system mixed reviews", Pittsburgh Post Gazette (1/12/03).
03K1 Mitra Kalita, "India’s new cast system: manhole covers". Pittsburgh Post Gazette (3/23/03) (from Newsday).
03M1 Joel Millman, David Luhnow, "Decade After NAFTA, Prospects for Mexico Seem to be Dimming", Wall Street Journal (4/21/03).
03U1 (Unknown) "China to Speed Up Urbanization, Resolve Farm Issues", Push newsfeed (1/8/03).
03V1 Gonzalo Vina, Tom Mudd, "Call Centers Migrate to India, and North of England Loses Jobs", Wall Street Journal (11/5/03).
03W1 Peter Wonacott, "In Rural China, Health Care Grows Expensive, Elusive", Wall Street Journal (5/19/03).
04C1 Leslie T. Chang, "At 18, Min Finds a Path to Success In Migration Wave", Wall Street Journal (11/8/04).
04M1 Dan Morse, "In North Carolina, Furniture Makers Try to Stay Alive", Wall Street Journal (2/20/04).
04S1 Norihiko Shirouzu, "Big Three’s Outsourcing Plan: Make Parts Suppliers Do It", Wall Street Journal (6/10/04) p. A1.

07M1 Vladimir Masch, "A Radical Plan to Manage Globalization," BusinessWeek.com (2/14/07) (Visited 2/16/07).

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