Inside a Chinese Factory

Via Tom, here’s a fantastic series of posts by the guy who’s setting the Chinese supply chain to manufacture the Chumby, an Internet-enabled alarm clock. Here you can see videos of a Chinese factory floor, with workers assembling sneakers. Here is a story about the fanatical level of dedication he has seen among the workers at the factory—dozens of employees stayed at work until 3 AM while he debugged a flaw in the first run of devices, and then showed up again at 8 AM to resume assembly. And finally, here are some videos of Chinese workers doing extremely detailed work quickly and accurately.

Some peoples’ instinctive reaction to this story is no doubt to wring their hands about the exploitation of Chinese workers. It’s not hard to see why; wages are only about $0.60/hour, and the jobs are tedious. And indeed, when I was in college in the late 1990s, there were a lot of activists who did just that, agitating for the shutdown of “sweatshops” in China and elsewhere. But I think this suggests a better way to look at the situation:

The amazing part is that the Shenzhen factories were complaining that labor rates were way too high. Apparently, minimum wage for factories in other regions is much less, so they are seeing contracts migrate away from their factories and inland where labor is cheaper. Think about it–Americans complain about work going to Hong Kong, Hong Kongers complain about work going to Shenzhen, Shenzheners complain about work going inland China, and to Vietnam (apparently Vietnam is the new hotness for cheap skilled labor).

The low wages and tedious work of the early sweatshops were a temporary condition. The author reports that the minimum wage in Shenzhen has been increasing by about 30 percent per year in the last couple of years. As the workers in Shenzhen become more skilled and the companies develop better business relationships with Western companies, demand for the area’s manufacturing facilities rise. The companies expand their facilities and hire more workers, and the competition for workers then pushes up wages. And that, in turn, will lead companies to increasingly transition to more complex and lucrative activities. Firms in Shenzhen will specialize in manufacturing more and more complex products, and eventually some of them will begin designing and building their own products.

That’s what happened in postwar Japan, South Korea, and Taiwan, all of which have since achieved Western levels of affluence. The anti-globalization activists meant well, but in reality, the opportunity to become integrated with the global economy will do far more to help the average Chinese worker than anti-sweatshop laws could possibly have done.