Saturday, June 18, 2011

not so fast sailor



but look at this:

Houseman and Mandel :
“Suppose a US automaker imports one million parts from a Japan-based supplier at $10 per part, for a total import bill of $10 million. Consider two scenarios:
Scenario 1: The US automaker improves its production process in its domestic factories, so it only needs half as many components. The import bill goes down to $5 million.
Scenario 2: The US automaker switches to a China-based supplier that only charges $5 per part. The import bill goes down to $5 million.
... these two scenarios are indistinguishable in the US economic statistics.
In both scenarios,
      the import bill goes down to $5 million.
The value-added of the US auto company goes up (sales minus the cost of materials),
  as does its profitability (sales minus cost of labor and materials)
                            and measured productivity (value-added per worker).

Note
    even though value-added per domestic factory worker goes up in the second scenario
  the impact on domestic real wages and employment is ambiguous.

 if value-added per worker is rising because of an improved ability to identify new sourcing opportunities, that same capability could be easily used to replace domestic workers…
  ... a measured productivity gain from increased efficiency in the supply chain
doesn’t necessarily improve the real wages or employment of US workers in auto factories.”