You only need one or two international hiccups for all the potential savings in outsourced labor costs to be eroded.
This would slash the incentives behind outsourced labor: By 2015, the labor-cost advantage between China and low-cost U.S. states will dwindle from 55% to 39%, and the savings gained from outscouring will drop to single digits for many products, according to the Harvard research.
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And as much as Apple is heralded for its product design, its efforts to run an environmentally friendly business and create products that make the world a better place, there is almost no attention paid to the fact that Apple is one of the nation's biggest users of outsourced labor.
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They're owned by Eleutian Technology, a company that is using the internet to bring jobs once outsourced to cheap labor in the East to back to unemployed Americans in the West.
What is crucial is the issue of the long term unemployed as certain processes are outsourced to cheaper, offshore labor centres.
Labor is cheap so many American companies have outsourced our manufacturing jobs to China.
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Spanish high-street retailer Zara has been accused of allegedly accepting slave-labor working conditions supplanted by more than 30 of its outsourced plants running in Brazil.
Even with higher labor rates the cost comparison yields that U.S. outsourced manufacturing is 50% the cost of having the product manufactured overseas and shipped here.
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We have compared the total landed cost to Chicago of labor, transportation, taxes, quality and inventory carrying costs for outsourced manufacturing in 4 countries: U.S., China, Cambodia and Brazil.
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Manufacturers, whether with only one or two production facilities or with all of their production outsourced overseas, are finding that, when all costs are considered, cheaper labor is often not enough for a dramatic savings.
Going back to the construction example, while you may not want to sacrifice skilled labor, you might want to slim the administrative ranks whose work can more easily be outsourced.
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