Taps Coogan – May 27th, 2021

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The following graphic, from Statista, shows the largest manufacturing powerhouses in the world as of 2019 based on data from the United Nations Statistics Division. Not surprisingly, China comes in first with nearly 30% of global manufacturing output. The US comes in second with nearly 17%, Japan in third with 7.5%, and Germany in fourth with 5.3%.

As we’ve noted before, China’s advantage in manufacturing has less to do with labor costs than many assume. According to a surprisingly detailed Department of Labor report from 1931, a structural iron worker in Baltimore made $1.65 an hour compared to just $0.19 for an equivalent worker in Rome, $0.25 in Paris, $0.35 in Berlin, and $0.38 in London. Similar ratios are detailed for other skilled labor jobs. In other words, a skilled laborer in the US earned anywhere from four to eight times as much as an equivalent worker in the next largest industrial economies of the time.

Today, the average US manufacturing wage is about $27 an hour compared to $6.50 an hour in China, a roughly four-fold difference. In other words, US wages were likely higher relative to the next largest industrial economies in 1930 than they are relative to China today.

China’s manufacturing advantage is the result of very bad US trade policy, lower energy costs, lower environmental standards, and rampant IP theft among other factors.

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