eli5 how it’s cheaper to manufacture goods in other countries and have them imported back to north america?

Question

I get it’s the poor pay for labor but what about transportation and materials?

In: 0

Answer 1

You already answered your own question. Cheap labor and materials overcome transport costs and any tariffs.

Labor costs can be significant. Also, labor laws protecting workers contribute to the cost as well. In the U.S. if workers work more than 38 hrs per week they get certain benefits. One of those is overtime pay that increases their hourly wage. Cheap labor countries dont have those protections.

So a factory with 100 workers in a cheap labor company might cost a total of a few hundred dollars for a 12 hr work day no matter how many days are worked. In the U.S. that labor cost would be in the thousands for a single day (7.25 x 12 x 100 = 8,500) assuming federal minimum wage, no overtime, and no benefits. Add to any of those and the cost dramatically increases fast. Most states dont use the federal minimum wage anymore either. Some are more than double the federal minimum.