Whirlpool plans to start closing its refrigerator plant in Evansville, Indiana, on 26 March eliminating 1,100 local jobs. It has decided to shift its operation to Mexico. Why? Lower labour costs.
As the world’s largest home appliance maker, Whirlpool makes a healthy profit.
The AFL CIO (our CTU equivalent) reports Whirlpool has has received a $19 million economic matching grant that should be creating jobs in America. They’ve started a petition to Keep it made in America
Sound familiar?
In April 2008 Fisher and Paykel announced about 1,000 jobs, or 28 percent of the total work force, would be lost in New Zealand, Australia and the northern United States as plants were relocated to Mexico, Thailand and Italy, where a similar number of new jobs would be created.
Fisher and Paykel said at the time that labour costs in Mexico were about a sixth of those in New Zealand.
Sooo… what happens next time there’s a plan to outsource, offshore, a lot of NZ jobs?
Or, next time there’s the potential to create and provide certainty for a bunch of jobs in New Zealand through investment in local infrastructure, such as the electrification of Auckland rail.
Are cheaper labour costs (in China, Mexico) the bottom line? Or should our economic development rest upon a wider set of values? Maintaining and building skills. Encouraging local innovation. Building our own export base. Keeping kiwi jobs kiwi.
And what should the role of government be?
I wonder if we should focus on things that are best done here, rather than trying to compete in areas where we don’t have the best resources, and maybe those resources are the labour market.
Focus on high yield things like technology where we can make a difference despite, or even because of, our size.
If I am reading this right and you are saying you favour protectionism over free trade… you really are a more traditional labour MP and you have my respect.
New Zealand has a good sense of welfare which brings a reasonable minimum and average wage and therefore our buisnesses will look overseas for employment. Our government needs to have restrictions on these imported jobs/off shore services to make sure there isnt an absence of employment here.
This is just one reason why the new zealand economy needs protectionism rather than free trade, others include our industries being relatively small and therefore being applicable to the infant industry problem, and also that since we have a small consumer base we cannot compete with the world price on some goods. Right now consumers in other countries are willing to pay more for products such as milk so our farmers can export their milk for a higher price to foreigners rather than sell it domestically to us, so that drives up the domestic price and misconstrues our market equilibrium.
Italy? Surly that cant have lower labor cost? What about Romania/Bulgaria, perhaps they need a certain level of education?
Perhaps there are other resource costs that we could reduce that would make up the cost of labor. Thinking electricity, transport, Land & Development (needs speeding up too but council compliance is ridiculous for the rewards). And the cost of credit is also high in NZ, but for such large companies they can always go offshore for finance.
Fair trade and globalisation are in the too hard basket for most politicians who go along with “free trade” on an-everyone’s doing it…- basis. Well the corporate sector can run but it can’t hide forever. A key activity is international labour solidarity. When more significant numbers of Chinese, Indian etc. workers get organised (ie wages are not so cheap anymore) this problem will be on the way to being sorted.
Some NZ unionists are taking small but practical action every week using the http://www.labourstart.org/ and http://www.iuf.org/ websites which organise weekly email campaigns for workers around the world, often with good results.
It is imperative we keep as many manufacturing jobs here in NZ as we can as many industries we thought had disappeared from NZ will be returning here within the next decade as long as we realise the main cause of the GFC was the biggest oil shock in history not the collapse of Baltimore’s housing market…
It’s pretty obvious from Joyce’s non-response to Telecom sending hundreds and hundreds of highly-paid IT jobs to India that the Nats will never intervene to save Kiwi workers from being outsourced.
Jeremy we used to have a clothing/apparel industry in NZ… the closure of LWR recently was probably the last bastion…
Companies like Warehouse are lauded for bringing cheap stuff to low wage NZ when in fact they have cost thousands of NZers their jobs one way or another.
Now Telecom and others are out sourcing, copying the move by the uS a few years ago…
The days of NZ manufacturing anything other than technology based seem small to me.
@Tracey and others, all good noting the problems, now to the other important half of discussion, whats the solution to all this?
Personally I think in the next 10-20 years we will be buying most of our meat and dairy products from China – especially with Fonterra et al becoming involved there. If clothes and consumer electronics can be cheaply sourced from the Chinese, there is no reason why food cannot be too – remember, free trade works both ways.
China will kill our farms just like they killed our factories. Simple as that.
Clare, this is akin to your bleat about Telecom outsourcing a couple of weeks back. I asked you at least four times then, and you didn’t answer, would you like to have a crack at it now?
What, exactly, would you do about New Zealand (Non-SOE) companies, sending jobs overseas?
@Tracey, the end of the era of cheap oil will see jobs coming home but far more expensive products… Good and bad points to manufacturing in a first world country but as the motto of business changes from “keep wages low” to “keep transport costs” low (i.e. distance) lots of industries such as clothing will return…