Global Wage Arbitrage and Sustaining Productive Capacity

The U.S. firms have offshored its manufacturing jobs in pursuit of short-term profits. As a result, the U.S. is now losing its manufacturing base.

Even China is losing its wage competitiveness, so MNCs are moving its production facilities to other South Asian countries. For instance, Intel reportedly moved some of its manufacturing to Vietnam.

The profit margin on low value-added export goods is very thin. Accordingly, although export countries strive to boost innovation and cut costs, when wages go up, it is highly likely that MNCs switch to a different low cost producer country.

This global wage arbitrage is wiping out some countries’ productive capacity. Productive capacity is a real income generator, so keeping a nation’s productive capacity intact is a matter of economic sustainability.

A nation has to reassess its globalization strategy and big business-centered industrial structure, bewaring global forces: who they are and how they are making profits.

In the meantime, the Korean media outlets report that the Korean manufacturing SMEs are experiencing a labor shortage mainly because the Korean workers tend to avoid physically-demanding jobs.