This article discusses how New Balance Athletic Shoe, Inc. has been able to reduce the economic gains from shifting low cost labor positions overseas by upgrading work, continual innovation, and the use of the latest technology. By doing so in its five U.S. factories, New Balance has been able to keep some low skilled jobs at home unlike rival footwear giants Nike and Reebok. Through sophisticated technology, innovation, and the use of training and work teams, New Balance has raised the skill-level for such work, thereby diminishing gains from shifting low skilled jobs to low-cost foreign labor markets. New Balance employees make $14 per hour, work in small teams, perform a variety of jobs, and switch tasks every few minutes (Bernstein 94). Because of this and expensive new technology, the $44.00 per pair of sneakers these costs would consume is whittled down to $4.00 per pair in comparison to the $1.30 per pair production cost in places like China and Indonesia where women hunch over conventional see-and-sew machines and earn anywhere from .20 to .40 cents per hour (Bernstein 94). Even this $2.70 differential equates to a manageable 4% of the average $70 price per pair of sneakers (Bernstein 95).
The impact of the success of New Balance’s alternative path to keeping low skilled jobs in the U.S. is enormous. The success of the company flies in the face of established economic theory, mainly the theory of competitive advantage which argues that “U.S. productivity and living standards will rise if we allow countries with a relative abundance of low-priced labor to perform our low-skilled work” (Bernstein 94). Raising the skill level of work, continual innovation, and the effective use of new technologies diminishes gains from foreign labor use. The success of New Balance urges policymakers and trade legislators to reconsider urging low-skilled labor shifts
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