We Don’t Have The “Killer App” Of Low Labor Costs

In the world of software and technology, a “Killer App” is a game-changer. It’s so good, it blows the competition out of the water, making everyone want your product.

In the world of global competition, we don’t have the “Killer App” of low labor cost. The United States cannot compete on low labor cost.

Unfortunately, low labor cost is what matters because every other competitive economic advantage that America has is either false, or is going away.

Think About It
If an experienced, skilled welder at a Ford factory in China makes less than $9 per day, while a comparable worker at a Ford factory here in America starts at $14 an hour (for a recent hire not eligible for the $29 per hour a union veteran gets)…

If a college graduate in China starts off at less than $400 per month, while a college graduate here in the U.S. would be happy with $3,000 to $4,000 per month…

Then you realize that China and other low-wage countries has an absolute labor cost advantage that can’t be beat here in the U.S.

  • Not by deregulation
  • Not by removal of environmental protections
  • Not by removal of worker safety protections
  • Not by lowering taxes – or even zero taxes
  • Not by weakening unions or destroying them
  • Not by training or “up-skilling” the American worker

The American Worker Is Ten Times More Expensive
You could pay a typical unskilled or skilled (and increasingly, even college-trained) American worker the minimum legal wage. And he would still be roughly 10 times or more as expensive than a comparable worker elsewhere.

Politicians Lie
You see all the political pundits argue that somehow, America would somehow be more globally competitive if only we had less red tape or lowered taxes (the typical Republican response),, or if we somehow “up-skilled” our workers with training and an education (the typical Democratic response). Sounds great, I know. But it just isn’t going to happen. These are just empty lies designed to make voters feel better. You only have to open your eyes to see the truth.

Deregulation, Removal of Protections, Lower Taxes?
We can’t deregulate as a competitive advantage because other countries with low labor costs typically already have fewer regulations The same goes for environmental and worker safety protections, even lower taxes.

Unions
Now a few low-cost countries do have labor union movements. But a factory owner there, rather than fire organizers or hire guards to beat them like they often do, could just give in to union demands and still they would have far lower labor costs than in here the United States.

Training and Education Will Not Solve the Problem
Probably the biggest myth I see these days amongst my friends is the idea that somehow, training and education will allow American workers to compete as knowledge workers and designers while the low-skilled labor is performed in another country. I will address why this myth of college education can lead to dangerous complacency and crippling debt in one of my next posts. But suffice to say, other countries are “up-skilling” too. For way cheaper.

Conclusion
America doesn’t have the “Killer App” of a low labor cost advantage. But if we did, would we still be America? Can or should the typical American worker be making $9 per day? I don’t think so… But on this decades-long road that we’ve been on, the writing can clearly be seen on the wall.

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