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Location factors Labour. Discussion questions What is the significance of labour on total costs in manufacturing industries? What is the significance.

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Presentation on theme: "Location factors Labour. Discussion questions What is the significance of labour on total costs in manufacturing industries? What is the significance."— Presentation transcript:

1 Location factors Labour

2 Discussion questions What is the significance of labour on total costs in manufacturing industries? What is the significance of labour on total costs in manufacturing industries? Labour costs take into account wage rates, non-wage benefits, labour productivity, turnover of employees. Labour costs take into account wage rates, non-wage benefits, labour productivity, turnover of employees. Describe how each of these affects labour costs. Describe how each of these affects labour costs. What does labour quality refer to? It is also very important. Why? What does labour quality refer to? It is also very important. Why? How does labour quality affect industrial location? How does labour quality affect industrial location? How does labour relations affect industrial location? How does labour relations affect industrial location? How does labour availability affect industrial location? How does labour availability affect industrial location?

3 Points to consider Labour cost Labour cost Labour availability Labour availability Labour quality Labour quality Labour stability Labour stability Labour mobility Labour mobility

4 How important labour is? ¼ of total costs in manufacturing industry on average ¼ of total costs in manufacturing industry on average 8% of total costs in food industry 8% of total costs in food industry 40% of total costs in research-based industry 40% of total costs in research-based industry

5 Labour intensity ratio Number of people employed Number of people employed = Value of shipments from the factory Value of shipments from the factory

6 How does labour cost influence industrial location? Labour-intensive industries shift from high labour cost area to low labour cost area Labour-intensive industries shift from high labour cost area to low labour cost area Hong Kong textile industry is a good example. Hong Kong textile industry is a good example.

7 The global scale Low wages in LDCs attract large transnational companies (TNCs) Low wages in LDCs attract large transnational companies (TNCs) Labour-intensive industries were relocated from MDCs to NICs Labour-intensive industries were relocated from MDCs to NICs

8 Transnational Corporation (TNCs) Electronics assembly industries making TVs, radios were relocated from the USA, Japan Electronics assembly industries making TVs, radios were relocated from the USA, Japan to S.Korea, Taiwan, Singapore where wages were lower.

9 Case study Nike sports goods have moved their mass production of shoes from S. Korea to Taiwan because of lower wages in Taiwan. Nike sports goods have moved their mass production of shoes from S. Korea to Taiwan because of lower wages in Taiwan.

10 Labour availability affected by Population Population Sex ratio Sex ratio Unemployment rate Unemployment rate Education level/skills Education level/skills Political stability Political stability

11 Labour availability as a location factor Availability of labour, as indicated by high rates of unemployment has little attraction for most industries. Availability of labour, as indicated by high rates of unemployment has little attraction for most industries. Redundant coal miners are not attractive for car assembly industries. Redundant coal miners are not attractive for car assembly industries.

12 Labour availability Nissan set up their branch plant in Washington in NE England – presence of unemployed young men, many trained in transferable engineering skills. Nissan set up their branch plant in Washington in NE England – presence of unemployed young men, many trained in transferable engineering skills.

13 Labour availability Some assembly plants even locate in areas where there is a large no. of females for production work. Some assembly plants even locate in areas where there is a large no. of females for production work.

14 Labour quality Labour quality is becoming  important than labour costs as automation has reduced manual jobs. Labour quality is becoming  important than labour costs as automation has reduced manual jobs. It is an important factor affecting location of high- tech industries. It is an important factor affecting location of high- tech industries.

15 Type of labour Influence on ind. location Skilled workers MDCs where professional training is available but higher mobility Semi-skilled workers Less employment opportunities than skilled labour  fairly mobile Unskilled labour Usually in densely-populated regions, e.g. NICs Automation In areas with shortage of unskilled labour, in MDCs

16 Stability of labour Degree of unionization  demand for higher wages, better fringe benefits, frequent striking Degree of unionization  demand for higher wages, better fringe benefits, frequent striking Degree of absenteeism  raise production costs indirectly Degree of absenteeism  raise production costs indirectly

17 Mobility of labour Usually highly-skilled labour has higher mobility Usually highly-skilled labour has higher mobility They are attracted by good living environment They are attracted by good living environment easy communication easy communication good airport good airport well-known universities well-known universities advanced information advanced information public services. public services. Example: IT industry Example: IT industry

18 High-tech industries (Knowledge-based, innovative ind.) High-tech industries (Knowledge-based, innovative ind.) such as software development. As the industries depend on R & D and product innovation, highly skilled scientists, engineers and technicians are important. As the industries depend on R & D and product innovation, highly skilled scientists, engineers and technicians are important.

19 High-tech industries High-tech industries Many high-tech industries like to locate in areas where skilled labour are found Many high-tech industries like to locate in areas where skilled labour are found e.g. in university towns like Cambridge in UK, in Stanford in USA e.g. in university towns like Cambridge in UK, in Stanford in USA

20 High-tech Industries choose to locate in an environmentally attractive location (good climate, landscape, housing services) choose to locate in an environmentally attractive location (good climate, landscape, housing services) where their workers want to live e.g. Denver in Colorado, California. where their workers want to live e.g. Denver in Colorado, California.

21 Locations chosen by high-tech firms in the UK are not the least-cost ones. are not the least-cost ones. In fact they are the most expensive in the country. In fact they are the most expensive in the country. The high quality of the workforce can offset the high costs of rents and local taxes. The high quality of the workforce can offset the high costs of rents and local taxes.

22 Government policy Laws and regulations to favour labour ’ s interest Laws and regulations to favour labour ’ s interest Establishment of technical schools and institutes to improve the quality and productivity of labour force Establishment of technical schools and institutes to improve the quality and productivity of labour force Example: Trade and Development Council in HK Example: Trade and Development Council in HK Example: Singapore government policy Example: Singapore government policy


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