John Kay, explains why higher wage earners in developed countries can't compete with low wage workers in emerging markets. Apple computer provides a good example of his point. The manufacturing value added to its iPhone is small relative to its selling price. Apple's value added is in the design and marketing of the product. That is how they make their profits.
Kay is correct in his analysis Apple's business model. The 10% of its workforce, which is in the US, is responsible for the value added that has made Apple successful. Apple's profits have made its US employees and its stockholders very happy. Apple is in the business of exporting its intellectual value added to the rest of the world along with its sales into the domestic market. On the other hand the majority of jobs created by the success of the iPhone have gone elsewhere. Not all of those jobs are low skill manufacturing jobs. Many of the jobs are high skilled jobs that are essential in the operation of most high tech plants, and in the management of the supply chain, as well as the distribution of the product. The skills that have been learned in this process have also been exported by Apple. They are no longer available in the US.
It would be nice if the US jobs that are lost in this process could be replaced by service jobs that do not face competition from lower cost international labor. Apple employs 700,000 international workers. Where are the unfilled service jobs that would provide the wages that would be otherwise earned by inventory managers, production managers, purchasing managers, quality managers, manufacturing engineers etc. in the US?
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