Thursday, March 17, 2016

Outsourcing: what’s it all about?

You’ve heard the arguments: American companies are outsourcing jobs to overseas locations so they can pay cheaper wages. American companies are moving their operations and headquarters overseas (“inversion”) so they don’t have to pay U.S. corporate taxes on their profits.

I saw a curious statement by Jeff Immelt, CEO of General Electric, who said recently that the cost of labor is a tiny fraction of total production costs in many manufacturing operations. says that a couple years ago Immelt mentioned this: “If you look at an aircraft engine, the content of labor is probably less than five per cent. We have two hours of labor in a refrigerator. So it really doesn’t matter if you make it in Mexico, the U.S., or China.”

TWO HOURS of labor in a refrigerator?!?

One source I checked said the average cost of a refrigerator is about $1,100—of course, you can spend less or a lot more.

I’m thinking, now, why does a refrigerator cost that much if there’s only two hours of labor in it?

I’m thinking, now, I’m gonna need some help listing all the reasons why anybody in his or her right mind would pay full list price for a refrigerator, instead of waiting for the “once in a lifetime” sale that happens every month or so at most of the big appliance dealers.

Copyright © Richard Carl Subber 2016 All rights reserved.

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