Question

Explain using comparative advantage!

Briefly summarize both the Chinese and African markets. What's happening in China's labor market and colleges and the impact on Africa. Remember: relative prices matter! Use the concept of comparative advantage in your answer.

Chinese Maker of Ivanka Trump’s Shoes Looks for Cheaper Labor

By KEITH BRADSHER (Links to an external site.)Links to an external site., JUNE 1, 2017

DONGGUAN, China — The Chinese factory workers who make shoes for Ivanka Trump (Links to an external site.)Links to an external site. and other designers gather at 7:40 every morning to sing songs.

Sometimes, they extol worker solidarity. Usually, they trumpet ties between China and Africa, the theme of their employer’s corporate anthem.

That’s no accident. With many workers here complaining about excessive hours and seeking higher pay, the factory owner wants to send their jobs to Ethiopia.

The employer, Huajian International, now faces scrutiny from labor activists for how it treats workers. Chinese authorities this week detained an activist (Links to an external site.)Links to an external site. who went undercover in the company’s factory here for a labor rights group. Two other activists who worked at Huajian are missing; it’s unclear whether they were detained.

Zhang Huarong, center, Huajian’s founder, singing the company’s song with employees. Credit Gilles Sabrié for The New York Times

Ms. Trump’s father campaigned for the United States presidency on a platform of bringing back (Links to an external site.)Links to an external site. overseas manufacturing jobs. But deep (Links to an external site.)Links to an external site.economic (Links to an external site.)Links to an external site. and demographic shifts mean a lot of low-end work — like making shoes — doesn’t offer huge profit in China. As President Trump accuses (Links to an external site.)Links to an external site.China of stealing jobs (Links to an external site.)Links to an external site., those jobs are now leaving for other shores.

Huajian, which also makes shoes for a number of American brands, was a major beneficiary of the decades-long shift of manufacturing jobs away from the United States. Global brands flocked to China to tap into the country’s cheap and willing labor pool.

Today, Chinese workers are less cheap and less willing. More young people are going to college and want office jobs. The blue-collar work force is aging. Long workdays in a factory no longer appeal to those older workers, even with the promise of overtime pay.

In interviews in December and again on Sunday and Monday outside Huajian’s vast industrial complex in this southern Chinese factory city, numerous workers interviewed by The New York Times complained about 14-hour days. While many liked the overtime pay, they said the days were too long, especially since they often included up to three hours of unpaid breaks for lunch and dinner. The workers insisted on anonymity for fear of retaliation by management.

Shoes on a conveyor belt in Dongguan. Many Huajian workers have complained about excessive hours and are seeking higher pay. Credit Gilles Sabrié for The New York Times

China Labor Watch, the advocacy group investigating the factories, said it found that employees had worked longer weeks than Chinese labor law allows, even excluding breaks. Such violations are common in Chinese factories.

A Huajian spokesman, Wei Xuegang, said the company knew nothing about the activists. Asked about the accusation from China Labor Watch, he said Huajian scheduled extra hours during busy times but paid workers according to the law. In a December interview, Zhang Huarong, the company’s founder and chairman, said Huajian followed overtime laws.

The Ivanka Trump brand declined to comment on the labor conditions or the activists. In terms of bringing jobs back to the United States, the company said, it was “looking forward to being a part of the conversation.”

Such tensions are fueling the drive of Huajian’s founder, Mr. Zhang, to move work to Ethiopia. A former drill sergeant in the Chinese military who sometimes leads his workers on parade-ground drills, Mr. Zhang says work like making shoes will never return to the United States and is increasingly difficult in China as well.

“Do Americans really like to work, to do these simple and repetitive tasks?” said Mr. Zhang, in the December interview. “Young Chinese also don’t want to do this after they graduate from college.”

In many respects, China’s economy is maturing.

The number of people who turn 18 each year and do not enroll in college — the group that might consider factory work — had plummeted to 10.5 million by 2015 from 18.5 million in 2000, government data shows. Because of the effects from China’s former “one child” policy, the figure is on track to fall below seven million by 2020.

Costs are rising too, as the government raises minimum wages and benefits in an effort to shift China’s economy away from cheap manufacturing. Wages in Dongguan have increased ninefold since the late 1990s, Mr. Zhang said.

Workers said they resented the hours, especially the unpaid breaks.

One employee’s printed schedule in December showed that the factory required 60 hours and 10 minutes of paid work per week. Chinese laws require that workweeks average no more than 44 hours and limit overtime to 36 hours per month.

On Monday, in the middle of China’s three-day Dragon Boat Festival holiday, throngs of workers filed into the factory. Asked whether he would be eating zongzi, the traditional rice dumpling served during the holiday, one worker replied that they don’t get to celebrate. Another said Huajian gave each worker two small dumplings and an egg for the holiday.

One worker, a middle-aged woman with the surname Du, said her children had gone home to central China. Ms. Du wished for time off to celebrate, so she could make rice dumplings for them.

Mr. Zhang said that his company kept working hours within legal limits, despite workers who want more overtime pay.

“We cannot let them work extra hours just because they have low pay,” Mr. Zhang said in a lengthy interview in December. “We have thought about it, but we want to do business well.”

Many workers have said their days were too long, especially since they often include up to three hours of unpaid breaks for lunch and dinner. Credit Gilles Sabrié for The New York Times

China Labor Watch said on Tuesday that it had lost contact with three undercover activists (Links to an external site.)Links to an external site. at Huajian factories. The wife of one in the factory in Dongguan said he had been detained by the police.

Li Qiang, who started China Labor Watch 17 years ago, said the group’s activists had never before been detained by the police. “I’m very worried about their safety,” he said. “The longer I’ve lost contact with them, the more I worry.”

Huajian peaked at 26,000 employees in China in 2006. Staffing is now down to between 7,000 and 8,000 thanks to automation and the shift to Ethiopia, Mr. Zhang said.

Huajian produces 100,000 to 200,000 pairs of Ivanka Trump shoes each year, a small fraction of the eight million pairs of shoes it produces annually. The Dongguan factory makes the heels while a second factory completes the shoes. Marc Fisher Footwear, which licenses the Ivanka Trump brand for shoes manufactured by Huijian, has said it was looking into the allegations.

Mr. Zhang has had occasional brushes with Chinese labor laws, although no more than many employers in this increasingly litigious society. In 2014, Li Jianguo, a worker, sued Huajian, saying he worked 104 hours of overtime per month and was not paid for it. Huajian acknowledged in that case that the worker had been putting in 52 hours of overtime per month, according to the text of the court verdict, and agreed to pay him for that.

Mr. Zhang said that workers currently earn $525 to $580 per month, including overtime pay but not including company-paid benefits like medical insurance and housing subsidies. Workers said that pay ranged from $380 to $580 per month.

The money can go a long way in a factory city like Dongguan. Workers said that a 215-square-foot apartment in the neighborhood costs $29 a month to rent. The company provides a monthly housing subsidy of $11.60.

A worker at the Huajian factory that produces heels for Ivanka Trump shoes, which are completed at another factory. Credit Gilles Sabrié for The New York Times

Citing labor costs and the country’s foreign investment push, Huajian is building a sprawling complex of factories, office buildings and a hotel on the southern outskirts of Ethiopia’s capital, Addis Ababa. Mr. Zhang’s shoe factories there already have 5,000 employees. When finished in four years, the Addis Ababa complex will be ringed by a replica of the Great Wall of China.

Some interviewed Huajian workers said they were not concerned about jobs being moved to Ethiopia, given the plentiful number of jobs in China’s southern manufacturing zone. Still, many longtime workers face age discrimination if they leave, as other factories prefer workers under 35. Shoemaking is not strenuous and poses few physical dangers, making it more appealing to older workers.

“I really couldn’t get used to these long working hours at the beginning,” one worker said, “but I don’t really have a choice.”

Follow Keith Bradsher on Twitter @KeithBradsher (Links to an external site.)Links to an external site..

Rachel Abrams contributed reporting from New York. Ailin Tang contributed research.

Answer 1

China had always have a comparative advatage to America in terms of manufacturing process of various goods like shoes. this has been attributed primarily to cheap labors available in China who are willing to work. China, due to its high population, availability of cheap labor due to less strict norms for labor wages. offers a perfect location to attract the various manufacturers to set up their manufacturing units there. In the recent past, Apple, have a manufacturing unit in China to utilize the cheap labor force available in China.

But the trend is changing now. China which was earlier used to be a perfect destination for setting up manufa cturing units by various firms, has undergone demographic and economic transformations. There is more of old age population now due to One Child policy, who are not fit for working. Moreover, people of China who complete their degree studies, prefer to work in blue collared jobs rather than working in low profile shoe making industry. Labor laws have also become strict and thus minimum wages have been rien for them. Thus China is slowly losing its comparative advantage to Ethiopia and other foreign countries in Africa.

Slowly the firms are looking for options other than China to set up the manufacturing units. The most popular destinations for US to shift its manufacturing units is Ethiopia in Africa and India. People in Ethiopia seems very enthusiastic and showed their willingness to work as they get employment or job opportunites.

Thus we can say that the comparative advantage of China is slowly turning towards in favor of Africa and many of the firms have already shifted their manufacturing units from China to Ethiopia,