Why super cheap consumer goods may soon be a thing of the past
Rent’s gone up, gas has gone up, the grocery bill has gone way up.
While all manner of basic necessities have gotten more expensive in the past few years, we’re also living in a time where some discretionary goods are cheaper than ever. E-commerce sites like Shein and Temu advertise skirts for $6 or knock off AirPods for under $10
We’re living in something of an age of super-cheap stuff. But we may be approaching the end of it, writes Jon Emont, Singapore-based reporter for the Wall Street Journal. He spoke with the Standard about how things got so cheap – and why they may not be for much longer.
Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: The headline of this piece reads, “The Era of Ultracheap Stuff is Under Threat.” But before we talk about what’s actually happening there, can you talk a bit about how and why we’re in this “era of ultracheap stuff” to begin with?
Jon Emont: Well, it’s a decades long story and it really just revolves around the fact that Asian countries have been much poorer than Western countries and they have large populations that needed jobs.
So for all types of labor intensive products, from televisions to T-shirts, it just made sense to not have them made close to home, right? Just given how much it would cost to get an American to sew a t-shirt, to make a TV and send it to a country like China or Vietnam, where people have much lower wage requirements.
And of course, that was all enabled by shipping that was very efficient and ports and everything else. And it just became a very efficient way to get cheap stuff to American doorsteps.
Well you write that factories are now finding it harder to fill open positions. What’s behind this workforce shortage on the supply side of the chain?
The simplest way to think about it is just that whereas Americans used to be so much wealthier than the Chinese people 30 years ago and so much wealthier – vastly wealthier – than Vietnamese people 30 years ago… Americans are still much wealthier, but that discrepancy has really diminished.
And one way that’s reflected is that it’s harder to get young people in these countries to actually be interested in, say, hunching over sewing machines, you know, for very little money an hour.
Now they just have more options. Tourism is booming. They’ve got their own service industry. Their malls are going up. You can work as a cashier, you can get online work, you know, as basically an Uber driver.
You know, there are all sorts of options. And that means that if you want to get a young person into a factory, you’re going to have to be willing to pay them more, gives them perks. And it’s just going to be more work than it used to be.
Can we talk about those perks for a moment? Something that stood out in your reporting is that some of these factories are trying to entice young workers with cafes and workout studios, free exercise classes. Is that working?
So there are some progressive factories that are tackling this problem.
You know, it’s sort of inspired by Google and Apple and all the perks that they give to tech companies. And when I saw that in Vietnam, you know, you go to a Vietnamese garment factory and you think, “okay, yeah, this is tough work and you’re not expecting too many benefits.” So when you do see that they’re serving, you know, matcha tea and have a yoga studio, it’s pretty remarkable. And it does show you the new challenges that these factories are facing.
Now, as to whether it’s working, it’s hard to say. Even the factories that are rolling out these perks are still struggling to attract young people because, I mean, I think probably the easiest explanation for that is that there’s no getting around what a job at a garment factory is. It’s sewing for, you know, something like 8 to 12 hours a day. So matcha tea isn’t necessarily going to solve that one.
Well, nothing speaks like money when it comes to hiring someone, right? Are wages starting to go up?
Yeah, I mean, wages are going up dramatically. And that’s one of the best indicators of this problem.
So in China and in Vietnam, manufacturing wages are going up much more quickly than they are in, say, the United States. And that’s, of course, just a reflection of the fact that there’s a lot of demand for factory workers and it’s getting harder to find factory workers.
How do you see this playing out stateside, then? Could we see a change in consumer habits as a result or more expensive goods or what, exactly?
Yeah, all those things.
So it could well mean that, you know, as labor continues sort of inexorably to become more expensive in Asia, the price of the goods we buy from Asia are going to go up. That would make a lot of sense.
And there are certainly signs over the past couple of years that that is what is happening. If it weren’t to happen, it’s only because mechanization and automation are getting so much better. And you know that reduces the amount of labor you need. So maybe, you know, you’re going to have to pay higher salaries, but you need fewer workers.
But I would caution that a lot of the things we buy from Asia are difficult to automate, things like shoes and garments. It’s really hard to beat people and companies have tried and really struggled with that. So I wouldn’t assume that that’s going to be this automatic.
Well, I know that we’re a long way from wage parity, even as wages continue to rise in Southwest Asia. But having said that, do you foresee a day in the not too distant future when we may see some of those factories relocating?
Yeah, it’s happening and it’s happening slowly – this notion of reshoring, right?
I quote a company where essentially they make their sofas out in Asia and, you know, they’re trying to bring some production to North America. And that means using highly automated methods because, you know, they’re bringing it to North Carolina. And obviously, yeah, you have to pay a worker in North Carolina a lot more than you have to pay a worker in Vietnam.
But as you point out, there are certain advantages. As shipping costs over the past few years have really been crazy, and as consumers become more concerned about the environmental implications of what they’re buying, and maybe they don’t want to see a huge carbon footprint associated with their products, more companies are beginning to give reshoring a look. And certainly the U.S. government is encouraging, you know, “Made in America.” And depending on the type of product, there are subsidies available. This is mainly for higher tech stuff.
But obviously, you know, Biden and Trump before him both wanted to see an American manufacturing renaissance. So companies do to some degree listen to that.
Super cheap has super fans, and I’m curious, when you see a headline like the one for your article, the question is how far off is that?
I think there are a couple of questions, right?
One is that we have seen this spike in inflation over the past 18 months or so. And, you know, that’s they’ve gone down a bit. But for the first time in memory, for a lot of Americans, you’ve actually seen prices jump a lot. And now that companies are all raising prices, it’s going to be sort of hard to get them to continue to push them down given these sort of inexorable factors we’ve discussed.
So I’m giving you a non-answer. I don’t know the answer. I don’t think anyone does. We’ll just have to see. But it’s hard to imagine there being some easy fix for all this.
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