I have mentioned in previous blogs that I grew up in Toronto, having only moved out west about a decade ago.  I never really spoke much about the area that I grew up in. It was a little bit east of downtown and it has been an area that has welcomed many of the new ethnic groups during their early years in Canada.  Starting with the Irish and the Italians, it has welcomed groups ranging from countries in Europe, Asia and now, a strong African population.  It was always quite the "melting pot".

When a new group makes its way into a new country, they often lack many of the skills that are required to obtain higher level, white-collared jobs, so it is quite common to see many of these people perform more physically intensive, mainly blue-collared jobs.  Among these jobs, especially a few decades back, were those working in assembly and manufacturing plants.  So, it goes without saying that these groups were hardest hit when many factory jobs starting be sent overseas to lower cost jurisdictions.

With their lower cost base, combined with strong work ethics, many companies were happy with the lower cost base versus what having a factory in Mexico or China brought.  However, as the standard of living rose in these countries, some manufacturers went into even lower cost areas, mainly in Asia and Africa.

Well, apparently, even that is not low enough in cost for some. Enter Foxconn...

foxconn banner

FoxConn's recent announcement was bigger than just lost jobs

In late May, FoxConn announced the elimination of tens of thousands of jobs at one of their facilities in China.  While the elimination of jobs at factories in North America is still tough, it tends not to be as newsworthy.  However, this one is different.

Sure, not all assembly work in a Chinese factory was done by a human hand, there was obviously some automation.  However, the interesting part is that the company found enough cost savings / ROI to justify such a move in a jurisdiction that pays its workers a small percentage of what a similar employee in the West may make.

What does that say for the rest of us?
 

The Bottom Line

Donald Trump has seen a strong level of support among wide swathes of voters.  One of the main ways that he has done this is to complain heavily about how trade deals have affected American workers.  I think that an announcement like this does not help his case.  All of the tariffs in the world won't help his case if even some of the lowest cost places in the world are moving towards automation in a bigger way.  While there definitely are some benefits to building things in the US, if the ever-increasing cost gap grows too large, it will be tough to ignore.