Industrial Restructuring

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Industrial RestructuringWhy has industry moved?
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Sectors of the Economy
Secondary
Primary
Tertiary
Quaternary
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Background on Economic Restructuring of the U.S.
and Canadian Economies
Job Competition
Figure 6.8 (p. 147)
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U.S. Change

• Industry has shifted from N.E. to S and W
• N.E. -6 million jobs from 1950-2009
• Steel, textiles, furniture moved South
• Unions, labor costs

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European Change

• Industry has moved West to south and East
• Cheap labor!
• Central Europe materials and markets

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Structural change of the economy
Figure 6.10 (p. 149)
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Minimizing Labor Cost
Maquiladoras foreign-owned assembly plants in
Mexico (mostly textiles,autos and consumer
electronics) Over 11,500 maquiladoras along
border with U.S. employ 2 million Mexicans
Revenues from maquiladoras, make up 85 of
trade between Mexico and U.S.
Sources PBS Ingolf Vogeler
Average work week is 60-70 hours wages about
5.75 per day. Women are 70 of maquiladora
workforce. Since 2000, some maquiladoras have
closed as corporations move assembly-line jobs to
even lower-wage countries, mainly China.
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Alfred Weber Least Cost Theory
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Weber Triangle

• Three factors
• Transport costs
• Labor costs
• Raw Materials
• Transport costs
• One market and two sources
• Equal distance and shipping costs dictates a
  market location
• Two weight-losing materials results in an
  intermediate location

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Webers Theory

• Webers theory results in 3 generalizations
• Using pure materials in the production process
  will always dictate a market location
• Weight-loss materials usage will pull the plant
  closer to the sources
• Intermediate location chosen most often

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Webers Theory

• Labor Costs
• Location chosen always has least combined costs
• A location my have higher transport costs, but
  more inexpensive labor

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Transportation Cost Minimization
Raw Material Oriented Tendency for industry to
locate near its source of raw materials in order
to save on transport costs Usually occurs when
raw materials lose weight in the production
process (e.g., paper, steel)
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Transportation Cost Minimization
Market Oriented Tendency for industry to locate
near population centers in order to save on
transport costs Occurs when product is more
costly to transport than raw materials (e.g.,
beverages, glass)
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Transportation Cost Minimization
Break-of-Bulk Oriented Location between sources
of raw materials and markets for products that
must be divided and shipped from a central point
of entry Intermodal transportation e.g.,
moving from rails to trucks or ships to trucks,
or ports to pipelines
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Where is the best location for a steel
manufacturing plant? Recipe for steel
(traditional) Coal 2 to 3 tons ( energy) Iron
ore 1½ to 2 tons Limestone ¼ to ½ ton Mix
all solid ingredients. Heat at about 600º F until
thoroughly melted. Pour molten blend into molds.
Cool and serve. Makes one ton of finished steel.
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Shipbreaking industry, Bangladesh
Shipbreaking yards in Bangladesh alone dismantle
about 90 giant ships a year, mostly oil tankers,
generating millions in revenue, employing tens of
thousands, and providing a significant proportion
of the iron and steel used by local industry.
However, there is a dark side to the industry in
which the workers must toil in extremely
hazardous conditions that frequently lead to
death or serious injury and which is tremendously
harmful to the environment. ... A majority of
ships are built in South Korea and China, filling
orders placed by Japan, the UK, the US, Norway,
Singapore and Denmark. Until the 1970s,
shipbreaking was done in the countries of origin,
using heavy machinery on salvage decks. But
increasing environmental regulations and labour
costs resulted in the transfer of this work --
first to Korea and Taiwan, and then to South Asia
after the Asian Tigers upgraded away from this
work. Source www.sos-arsenic.net
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Consider transport costs of a cars components.
Wheres a good place to locate your assembly
plant?