Labor cost increases continue to hit Asian producers
Imagine getting a 20% increase in your paycheck almost overnight. Then several months later, imagine getting another 15% increase.
Unrealistic? Unheard of? Well those are minimum wage increases that officials in China are requiring in parts of the country, including Shenzhen, a furniture manufacturing area in the Guangdong Province of southern China.
The figures were reported earlier this month by the Wall Street Journal, which also quoted Hooker Furniture CEO Paul Toms as saying he believes his company's sources have seen labor cost increases from 20% to 30% of late.
For some, this is old news. As we reported this past summer, the issue also affects furniture-producing countries like Vietnam, which has long instituted minimum wage hikes in response to runaway inflation.
It's also true that these high percentage gains are coming off pretty small numbers to begin with. For example, a worker making $100 a month will only see their wages rise by about $22 a month with a 22% increase.
But given how much labor represents in overall production costs in Asia, this, along with materials cost increases and currency fluctuations, continues to have serious implications for the industry. As the Wall Street Journal also reported, these issues are showing up in a host of consumer goods from shoes and camping gear to furniture.
The combination of factors likely will continue to have ramifications on furniture production in Asia as a whole in 2012.
The question is, how much longer can the industry bear such increase in a still fragile economy where many consumers are still watching every penny?
Will more production shift to emerging countries like Indonesia? Will it open up new frontiers like India and Cambodia? Or will U.S. producers continue to benefit as long as they hold some of their own costs down? What do you think?
joe t commented:
cant keep jobs here. then profit margins shrink for execs. more money can be made by shipping jobs overseas & the furniture leaders can have important meetings at the ritz carlton in florida & get important awards and feel good.
Teed Warren commented:
Would you a USA citizen like to live the way a China or Vietman person does. We are our own worst enemy,we want things right now nd cheap. We as a society are really loosing our country,manufacturing base, the middle class as we know it. The big retailer are screwing the American people royally. We the American pay to high of a price for garbage that barely lasts six months ( clothes and shoes), firniture for maybe 1 or 2 years.We need to do a good days work for good days pay and then buy USA .
made
Rene Fimbres commented:
Mexico’s minimum wage will go up January 1st 4.1% vis-a-vis 20%+ in some regions of China. Also, Mexican inflation this year will probably be less than 3.5% and the forecasts for 2012 are not much different than that. This means among other things that prices of furniture imported from Mexico will go up very little or not at all. Price stability, shipping transit times of days not weeks, duty free and landed price competitiveness against Asia are some of the advantages of Mexico. renefimbres@californiafurniture.biz
ascot jones chang commented:
imagine living where they can take away your land overnight or make you move your family after 500 years living in the same home,if you get sick ...you are out on street ,no one cares for the lowly worker in china , no one,keep the money here in usa ,so it cost more what about our infrastructure,roads bridges schools ....wages lost are jobs lost.
