As you may be well aware, China has consistently devalued their currency for many years. This made the cost of the products from Chinese factories ultra cheap, ushering in the era of $30 DVD players and $300 big screen TVs.
Because the currency is so low, the prices people pay for goods from China is also very low, and with those low prices are extremely low wages compared with the wages we have here in America. If you look at the chart below, you can see that US wages have declined, while Chinese wages have increased...
In the United States it has become a "buyer's market" for employers. With so many jobs going overseas (not just to China), there are fewer jobs available in the United States, so employers can demand lower wages. There have even been some calls to reduce or abandon the minimum wage in the United States.
What we have seen in the last couple of decades is a "race to the bottom" when it comes to price of goods. Wal-mart used to have "Made in the USA" on their trucks, and that was replaced with the "Low Priced Leader". But one unfortunate side effect of low prices is low wages. By teaching people to choose the "cheapest" product, they are also choosing the product which has the smallest profit, which means there is less money to be paid out in wages.
Americans have been educated to think that the value of their life will be better by choosing the cheapest products, because they will have more money left over. Unfortunately, with fewer profits per product, employers must cut costs to compete, and they do this by either keeping wages flat, laying off people, or sending jobs overseas.
While this is a complex problem, I would suggest a few potential solutions:
- Teach people to value quality. Help them understand how some more expensive goods will last longer, and save them money over time. By purchasing higher quality goods, it will also contribute to upward pressure on wages.
- Increase competition to employ workers so it is not such a buyer's market. The government will need to hire people to build infrastructure.
- Build infrastructure. One reason China has seen wages increase so much is they have invested massively in infrastructure with transportation systems to move workers to factories, and new buildings and equipment to produce goods more efficiently.
- End corporate income tax for businesses that do not import goods from overseas, and produce products in the United States. Favor those companies that help us most.
- Improve education. Some of the highest paying jobs right now are in Silicon Valley, which also has one of the best school systems in the nation. We need to educate people to innovate and excel. Just teaching people enough to work in the service industry is a real disservice to people whose talents could be harnessed to do so much more.
I hope you will also leave your comments and suggested.
Best Wishes,
David