1 Chapter 9-2 :Labor Labor flexibility - more educated workers for a wide variety of tasks and functions. Some need cheap labor, other labor skills constitute.

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Chapter 9-2 :Labor• Labor flexibility - more educated workers for a wide variety of tasks

and functions. Some need cheap labor, other labor skills constitute the locational attraction and regional advantage. Hi-tech industries demand more skilled labor than unskilled, uneducated work force.

• Poorly distributed skill force in some area not ready for use in the development - Siberia, in central Asian Muslim countries, labor surplus seen due to resisted resettlement.

Market• Market Orientation - industrial location near to the consumer.• location near the next stage of production - tires, windshields, Auto

assembly plants scattered throughout the N Amer. - consideration of market orientation.

• ubiquitous industries - market and industrial location together, such as newspaper publishing, bakeries, and dairies

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Wage Rates and the Cloth Trades

• Textile industry started from New England area, moved to Piedmont of the SE US (only area left in the US)

• Competition from NICs (newly industrializing countries), 1970s in Korea, Taiwan, and Hong Kong, moved to China, Bangladesh, Indonesia, Mexico and Thailand

• Apparel Industry - similar trend, see next slide

Sources of US Clothing Retailers

ItalyFrance

UKJapan

Taiwan

HongKong

Singapore

SouthKorea

IndonesiaTurkey

SouthChina

Philippines

India

Thailand

Mexico

Malaysia

Brazil

Egypt

Bangladesh

Zimbabwe

Sri Lanka

Pakistan

SaipanMacau

Tunisia

Interior China Morocco

UnitedArab Emirates

Central America Caribbean

Columbia

Oman

Chile

Kenya

Mauritius

Eastern Europe

El Salvador

NicaraguaPeru

Bolivia Russia

Vietnam

Lesotho

Burma

Madagascar

N KoreaCambodia

Maldives

Yap

LaosFijiCyprus

Bahrain

Oatar

Armani/Polo/Gucci:1/2Dept Store:Limited/Gap:2,3,4Wal-Mart/Kmart:3/4/5

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800 items surveyed of Cookeville Stores

Country No. %China 277 28.88US 198 24.75Mexico 52 6.50Taiwan 192.37Bangladesh 18 2.25Indonesia 16 2Dominican Rep 16 2Korea 16 2India 15 1.87Guatemala 13 1.62Thailand 12 1.5Malaysia 11 1.37Philippines 11 1.37

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Transportation• Weight reduction - to minimize transportation cost• Weight-gaining production - only ship concentrated syrup to

reduce transportation cost, local bottlers to add water and distribute to local markets.

• Water transportation - cheapest means of long distance freight movement (9.5). Inland waterway improvement and canal construction marked the first phase of the Industrial Revolution in Europe and was the first stage of modern transport development in the U.S.

• Railroads - low labor and fuel, but inflexible in route, expensive to construct and maintain railroad. Traffic declines lead to the abandoned railroads (125,000 miles between 1930 and 2000)

• Truck - responsive to new traffic demands, intervening opportunities, but low efficiency in the long-distance and high volume commodities. (page 324 comparison table)

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Transportation and Location• Fig. 9.7 - Spatial Orientation

Tendencies - represents the application of differing freight rates - loading/transporting and unloading charges - different commodity has different freight rate.

• Fixed cost, Terminal cost and Line-haul (over the road cost), the curvelinear functions (9.8), two short hauls cost more than a single continuous haul over the same distance. (9.9)

• Break-of-bulk points - where goods have to be transferred or transhipped from one carrier to another. (NYC, SFO, Chicago.., Singapore, Hong Kong.)

Baking bottling

Auto,

Furniture

CanningFreezing

Copper,Rice,sugar beets

Lumber PulpMills

Market Oriented

Weight loss

Weight gain

Raw material oriented

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Industrial Locational Theory 1-Least-Cost Theory - Weberian analysis

• Minimize three basic expenses - relative transport, labor, and agglomeration costs.

• Transport costs are the major consideration determining locations, but if the costs from other two factors are high then transport cost is not the determining factor.

• Five assumptions - 1) isotropic (uniform) plain 2) single product shipped to single market 3) more than 1 raw materials sources 4) available labor in fixed location 5) shortest path between origin and destination (weigh and distance determine shipping cost)

• Locational triangle (9.10) – determines the least transport location

• Plane table solution to a plant location (9.11)

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Theory 2 - Locational Interdependence Theory (locational decision influenced by competitors)

• Concern is with variable revenue analysis (instead of variable cost)• Fig 9.12 - Competitive location in a linear market • Market become sensitive to price, sales (elasticity of demand) to more

distant customers will be discouraged and producers seeking will again separate rather than aggregate

Theory 3 - Profit-maximization approach• substitution principles - reduced labor can be replaced by increased

capital for automation. • spatial margin of profitability (9.13) - points where cost=revenue• Satisficing locations - acceptable, but not optimal locations• footloose firms - neither market or raw materials oriented, transportation

cost can be neglected, spatial margin can be broad, such as computer industry where products are light and valuable and the locations are not important.

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Other considerations and controls• Fordism - assembly line concepts• Post-Fordist - flexible manufacturing - smaller, greater variety• Info. tech. - cost-time rather than cost-distance• Agglomeration - from sharing transport, social services, public utilities,

comm. facilities. • Multiplier effect - each firm added to the agglomeration will lead to the

further development of infrastructure and linkages. (9.14)• Deglomeration - suburbanization of industry or relocation to different

locations - once the costs of aggregation exceed the benefits.• JIT - Just-In-Time production., seeks to reduce inventories for the

production process by purchasing inputs for arrival just in time to use and producing output just in time to sell.

• JIT - one expression of a transition from mass production Fordism to more flexible production systems. Such as reprogram to produce products, responding to current market’s need.

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Comparative Advantage• Based on the growing international importance in industrial location and

specialization importance.• Outsourcing - domestic products have parts or products produced

abroad.• Northern border of Mexico - American sister plant (maquiladoras)

allowed in Mexico within 12 miles of the U.S. border for duty-free assembly of products, multiplier effect employed workers on either side of the border.

• US benefits from Japanese auto manufacturing plants’ outsourcing• Tansnational Corporations (TNCs) - most of them are engaged in

primary and secondary industries...(Fig 9.16)• Conglomerate Corporations - companies engaged in quite different activities Philip

Morris - Marlboro,Miller Lite,Kraft-cream cheese, Maxwell House Coffee, JELL-O Oscar Mayer-hot dogs, real estate, publishing...

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World Manufacturing Patterns and Trends

• E Anglo America, W and Central Europe, E Europe, and E Asia - accounted for 3/5 of the world’s manufacturing output by volume and value. The first three are the beneficiaries of earlier Industrial Revolution development, are in postindustrial phase and the traditional manufacturing and processing is less important now. E Asia emerged in recent years.(Figure 9.17)

• Anglo America - declining importance. Began in 19th century from free Canada and US from total dependence on Europe. Megalopolis- market and labor base, from S Maine to Norfolk, Virginia

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Anglo America

Anglo America -• Southeast - textile/tobacco,

food/wood/furniture, iron/steel in Birmingham

• Gulf Coast - Texas petroleum, sulfur and salt

• Denver/Salt Lake City - high-tech• Asian-Pacific market more

influence on Northwest region of the US - aircraft, software, Silicon Valley, Fruit/vegetable in LA to SD

• Fastest growing industrial region - “la frontera” border US and Mexico

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• Western/Central Europe– 1900, Europe accounted for 80% of the world’s industrial output, but it has

since declined. Steam power provided the impetus for the industrialization in England

– Largest and most important single industrial area of Europe extends from the French-Belgian border to western Germany, cored in Germany’s Ruhr. (9.20)

• Eastern Europe– planned economy dominated the locations originally– light industrial market-oriented production focused on Russia’s Central

Industrial Region (9.21)– Heavy industry in Ukrainian Donets Basin-Dnerpr River

• Eastern Asia - most productive region of the world (9.22)– Japan - recovered from WWII, developed along coastal regions– China - started activities in late 1970s.– Four tigers - Taiwan (9.23), S Korea, Hong Kong and Singapore, may be

joined by Malaysia, Thailand, Philippines, Indonesia, and Vietnam

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Japan

• Less than one century after the beginning of the Industrial Revolution, Japan became a leading Industrial force in the world.

Meiji Restoration

•1867/68, Tokugawa era •Moved capital from inland to coast area•Adopted French/Germany compulsory education•Sent scholars overseas to study sciences and languages•Supported large family business/industries (zaibatsu)•Sino-Japanese War (1894-95), Taiwan colonized•Russo-Japanese War (1904-05), annexed Korea 1910.• Established colonies which brought raw materials from Korea,China and Taiwan

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Kanto Plan - 1/3 J pop, includes Tokyo-Yokohama-Kawasaki metro area (27 mi)

Kansai District - from eastern end of the Seto Inland Sea to the Nagoya area, including Kobe-Kyoto-Osaka triangle. Major chemical, automobile, shipbuilding and others. “Tokaido” -urban agglomeration.

Kitakyushu District -heavy industries, good place for doing business with China

Toyama District -cheap hydroelectricity, paper manufacturing, chemical/textile industries

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Northeast District - Industrial heartland with coal and iron deposits, Chinese Pittsburg-Shenyang Anshan - center for iron/steel productionHarbin - textiles, farm equip

Shanghai and the Chang (Yangzi) District - diversified production and local specifications

Guangdon District - (Canton) 4th in the country even with China ruler’s north preference

Special Economic Zones (SEZs) - “open cities” and “open coastal areas” to encourage foreign investors.

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High-Tech Patterns (9.24)

• Classical location theories not applicable in explaining the location of high-tech industries.

• White collar worker - research scientists, engineers and skilled technicians

• Impact of high-tech industries -

– 1) become major factor in employment growth and output, 16% of non-farm workers of high-tech employees.

– 2) specialized agglomeration is created, such as Silicon Valley, Silicon Forest, Route 128, Software Valley in Utah, Silicon Swamp in D.C...

– 3) Five locational tendencies a) Proximity to major universities or research facilities b) avoidance of areas with strong labor unionization c) available venture capital d) location with “quality of life” reputation e) available first-quality comm. and transportation facilities

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High Tech States/Locations

Silicon Valley(Bay Area)

Irvine/Orange County(LA)

Silicon Forest(Seattle)

Software Valley(Utah)

Research TrianglePark (NC)

Route 128/495Boston

Silicon Swamp (DC)

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Tertiary and Beyond

• Post-industrial - labor force in primary component fell from 66% in 1850 to 2% in 2000, service rose from 18% to 80% (9.25)

• Advanced and subsistence society difference (9.26). The greater the service share an economy, the greater is the integration and interdependence of that society. (Table 9.1)

• Tertiary - specifically to those lower-level services largely related to day-to-day needs of people and to the usual range of functions found in smaller towns and cities worldwide. - market oriented locational consideration based on pop pattern and spatial structure of production and consumption, - retailing sales..

• Outsourcing - contracting workers from professional cleaning companies...change status of worker from secondary to tertiary

• Tourism - largest industry in jobs, a tertiary industry

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Quaternary and Quinary

• Skill-based service.

• CEO, decision makers, research scientists found jobs in metropolitans, universities and research parks, government

• World fastest growing services in financial, brokerage and leasing activities.

• Cost of data transmission help to internationalize the service types. Developing countries benefited more from the export of service based on the new technologies, such as India become a major player in software industry, call centers in India, health insurance claim centers in Caribbean countries.

• Increased FDI (foreign Direct Investment) in international quaternary service benefit developing countries, but the major players are still developed countries (Table 9.2)

• International Financial Centers (9.29)