AP Photo/Bebeto Matthews
- Young people in Asia don't want factory jobs, so companies are raising wages and adding perks.
- In turn, some companies are raising prices on goods in part to offset these wage hikes.
- The days of cheap electronics, clothes, and toys could be numbered.
Stock up on your Barbie dolls while they're still relatively cheap. Prices could shoot up in the years ahead, and it's not just due to the hype around the new blockbuster film.
The same goes for a wide range of products Americans have grown used to splurging on, including clothes, TVs, furniture, and toys.
That's because factories across Asia that have traditionally produced many of these goods are struggling to find workers, The Wall Street Journal reported. In response, many manufacturers are raising wages and offering other perks — including yoga classes, better cafeteria food, and subsidized kindergarten for workers' children.
While this is good news for Asian workers, it could be bad news for American shoppers when factories raise prices to offset their rising labor costs. The days of cheap stuff could be coming to an end.
"For U.S. consumers that have been used to having goods at a certain and relatively stable part of their disposable income, I think that foundation is going to have to be rejiggered," Manoj Pradhan, a London-based economist, told the Journal.
Over the past two decades, cheaper overseas manufacturing costs in Asian countries like China have driven down prices for a variety of goods. But factory work isn't quite as cheap as it used to be. In China, manufacturing workers' wages have more than tripled over the past decade, and factory workers in Vietnam, Malaysia, and Japan, have seen notable pay bumps as well.
The trickle-down effect on prices has already begun. Companies like the Barbie manufacturer Mattel, the toy maker Hasbro, and Nike are facing elevated labor costs in Asia that have contributed to price hikes.
Mark Perry, University of Michigan economist
Experts attribute Asia's factory labor shortage to a variety of factors. It starts with young workers, many of whom have little desire to work in the industry. Some have pushed back on the working conditions, while others are holding out for higher-paying jobs more in line with their education levels. China's unemployment rate among workers aged 16-24 hit a record 21% last quarter despite the fact many factories are in need of workers.
"After a while, that work makes your mind numb. I couldn't stand the repetition," former Chinese factory worker Julian Zhu told VOA News last November.
In 2001, Nike's typical Asian factory worker was 22 years old. Today, the company's average Chinese and Vietnamese workers are aged 40 and 31 respectively.
Moving factories from Asia might not help American shoppers
Faced with this shifting manufacturing environment, US corporations can choose to either stick it out in Asia or move some of their manufacturing to the US or other countries like Mexico. COVID supply chain headaches, in addition to national security and human rights concerns, have already led many businesses to shift some of their production lines from China in recent years.
While moving to the US has certain advantages, like creating American jobs and improving supply chain resiliency, it's unlikely to save shoppers from rising costs. That's because, due to the cost of labor and other factors, it's generally more expensive to manufacture goods in the US than Asia.
Some companies, like Barbie's Mattel, see "nearshoring" — shifting supply chains to countries closer to the US — as the best path. In 2019, the company closed two of its Asian factories and spent $50 million to expand an existing plant in Mexico.
"Being able to have product close to your consumer and not having to transport it from Asia, that's going to be more profitable and more competitive when you take costs into account," Gabriel Galvan, Mattel's Latin America managing director, told Reuters last year.
While Mexico may offer cheaper labor than the US and lower shipping costs than Asia, it remains to be seen whether this will be enough to keep prices in check.
It's probably best to just buy that Barbie now.