Levi’s and Etch A Sketch are just two of the many ‘American’ products that are now made overseas. How will the increasing outsourcing of jobs affect workers and the economy in the U.S.?

Made in the USA? Not anymore: Levi’s and Etch A Sketch are just two of the many ‘American’ products that are now made overseas. How will the increasing outsourcing of jobs affect workers and the economy in the U.S.?

Joseph Kahn

Since it was founded by a German immigrant who began outfitting gold miners in San Francisco 150 years ago, Levi Strauss and Company has turned out more than 3.5 billion of the sturdy denim jeans that have become an American icon right up there with Coca-Cola, Hollywood, and baseball.

Across the country from Levi’s headquarters in San Francisco, workers in Bryan, Ohio, a town of 8,000 in the northwest corner of the state, produced another American classic for 40 years: Etch A Sketch, a toy that has been entertaining children for generations.

And 200 miles away, in Chicago, Radio Flyer Inc. has been manufacturing its little red wagons for more than 80 years.

Now, however, neither Levi’s nor Etch A Sketch is actually made in the U.S., and soon, metal Radio Flyers won’t be either.

Three years ago, executives at Ohio Art, the makers of Etch A Sketch, decided to shut its U.S. plant and move manufacturing to China. Last fall, Levi’s announced it was closing its remaining factories in the U.S. and Canada and shifting the work to suppliers in 50 countries in Asia, the Caribbean, and Latin America. And in March, Radio Flyer announced plans to move production of its metal wagons from Chicago to China, where its tricycles and scooters are already made. (Manufacturing of plastic wagons will remain in Wisconsin.)

Levi Strauss, Ohio Art, and Radio Flyer are examples of the many American companies–from small manufacturers to giants like Boeing and Microsoft–that are outsourcing jobs overseas, to countries where labor and other costs are lower than in the U.S. Since 2001, the U.S. has lost nearly 3 million factory jobs.

But it’s no longer only manufacturing jobs that are moving (or being created) overseas. Technology has made it easier for many types of jobs to be located almost anywhere. As a result, thousands of software development and call-center jobs, for example, have moved abroad.

PAINFUL ADJUSTMENTS

Many economists argue that globalization benefits Americans by lowering prices on everything from health care and iPods to shirts and socks at Wal-Mart, and by allowing companies to use the money they save from outsourcing to create other higher-skilled, better-paying jobs in the United States; at the same time, they say, the countries gaining jobs benefit from stronger economic growth and greater stability.

But the experience of workers at Levi’s, Ohio Art, and soon, Radio Flyer, shows that outsourcing can be painful for those directly affected by job shifts.

Levi Strauss is closing its North American plants as part of a restructuring that will cut the company’s workforce from 37,000 employees in 1996 to 9,750. Among those laid off were 819 employees in San Antonio.

Clara Flores, 54, a hem sewer in San Antonio who has been at the company for 24 years and was president of the plant’s union, says that Levi’s is providing retraining and other benefits. But she says it will be hard to find work with the benefits she had at Levi’s: $18 an hour in wages, four weeks of annual paid vacation, and family medical and dental benefits for $24 a week. “Where are we ever going to find something like this?” she asks.

Marivel Gutierez, 43, a side-seam operator who also had 24 years of service, acknowledges that workers elsewhere would benefit. “There still probably is an American dream,” she says of the boon to those workers. “But what about us? What happens to our American dream?”

In Chicago, about half of Radio Flyer’s 90 employees are expected to be laid off. At the Etch A Sketch plant, about 100 union employees lost their jobs, though some assembly-line workers were rehired in other departments, and some got jobs unpacking crates of Etch A Sketches from China.

“Everyone knows the reason these jobs move to China,” says Carolyn Miller, 64, a longtime assembly-line worker. “But when it happens to you, I can tell you, it hurts.”

In a small town like Bryan, the pain was shared. Bryan’s tax base has been hurt by the loss of manufacturing jobs. But for William C. Killgallon, Ohio Art’s chief executive, and his brother, Larry, who is president of the company, the logic of moving jobs to China was inescapable.

24 CENTS VS. $9 AN HOUR

China, which manufactures 80 percent of the toys sold in the United States, has 8,000 toy makers competing fiercely for business by getting their production costs as low as possible. Kin Ki Industrial, which makes Etch A Sketch in China, stays competitive, its workers say, by paying them 24 cents an hour in Shenzhen, where the legal minimum wage is 33 cents. When the Etch A Sketch line shut down in Ohio, wages for the unionized workforce had reached $9 an hour.

Since early 2001, Etch A Sketches have been made on the outskirts of Shenzhen, near Hong Kong. Although company officials say the Etch A Sketch plant workers make a decent salary and receive good benefits, Kin Ki employees, mostly teenage migrants from China’s interior provinces, complain about long work days and low pay. They say they sleep head-to-toe in tiny rooms. Most do not have pensions, medical insurance, or work contracts.

With American retailers like Wal-Mart scouring the globe for cheaper products–which in turn pressures companies to cut their costs–Ohio Art has had to keep making Etch A Sketch cheaper to buy. It sold for $3.99 when it was introduced 43 years ago. If it had kept pace with inflation, it would retail for $23.69 today instead of $9.99. Levi’s says it also faces increasing competition, in its case, from 200 new brands in the last decade.

A CAMPAIGN ISSUE

With job growth in the U.S. still slow, the migration of jobs overseas can make finding a new job difficult for American workers. That is creating a political problem for President Bush, whose likely opponent in the November election, Senator John Kerry, is already making the outsourcing of jobs a major issue in the presidential campaign.

Olga Kauffman, a community organizer and consultant hired by Levi’s to help workers who were affected by the San Antonio plant closing, says the biggest problem is that the jobs available for laid-off workers are largely in lower-paying service industries. Gutierez, the laid-off side-seam operator, echoed the concern of many former workers facing an uncertain future. “What’s waiting for me out there?” she asks.

DISCUSSION QUESTIONS

* If you were shopping for a shirt or blouse and found a Chinese product that cost $5 less than a comparable U.S. product, which would you buy?

* Does government have an obligation to help people like Clara Flores and Marivel Gutierez? If so, how?

TEACHING OBJECTIVES

To help students understand the growing national debate over the effects of globalization, specifically how many American jobs are moving overseas to lower-cost countries.

CLASSROOM STRATEGIES

BEFORE READING: Ask students which brands of TVs, CD players, or clothes they own. Explain that this makes them a critical element in the ongoing debate over world trade

SHOPPING SCAVENGER HUNT: Ask students to investigate labels the next time they are at the mall. Tell them to take a half hour in a clothing, sports, electronics, or some other store. Have them take notes on the number and type of items they find that are made in foreign countries. Identify countries of origin of each item and bring their findings to class.

On the board, students can draw four columns, one for the item and one for the country of origin. In the third column, write the per capita gross domestic product of the country. (See UPFRONT World Affairs Annual, Nov. 3, 2003, pp. 24-33.) In the fourth column, write the per capita GDP of the U.S. How do the last two columns compare? Tell students that the value of goods and services is one way to measure a nation’s wealth. Are less-wealthy countries likely to pay high wages or low wages? Is it possible that at least some of the foreign-made items on the students’ lists used to be made in the U.S.? Are they now made abroad because of lower wage costs? (See cartoons, p TE 8.)

GLOBAL TRADE RULES: The article reports that the Chinese Etch A Sketch workers labor long hours for little pay under harsh conditions and that global trade rules do not protect workers’ rights. Should Americans be concerned about working conditions in other countries? If they are concerned, how might they try to correct those conditions?

WEB WATCH: www.aflcio.org /issuespolitics/globaleconomy/is an AFL/CIO site that provides background and links to the effects of globalization from the labor unions’ perspective. www.csis.org/nge/trade /wldtrade.html shows a regional map of U.S. trading partners.

Upfront QUIZ 2

OUTSOURCED ICONS > MULTIPLE CHOICE > PAGES 10-13 DIRECTIONS: Circle fetter next to the best answer.

1. When American companies move jobs to other countries, the phenomenon is referred to as.

a capitalist expansion.

b outsourcing.

c socialism.

d foreign exchange.

2. Since 2001, the U.S. has lost some 3 million jobs to other countries; most of these jobs have been those of

a computer technicians.

b teachers.

c factory workers.

d transportation workers.

3. Many economists say that in the long run transferring some jobs abroad will

a increase poverty in the U.S.

b improve the U.S. image around the world.

c force Americans to produce more goods for export.

d produce better jobs and pay in the U.S.

4. Another alleged benefit of exporting jobs to poorer countries is that it will

a lead to greater stability in these countries.

b put these countries in debt to Americans.

c help reduce labor costs in the United States.

d keep wages at low levels in these countries.

5. Etch A Sketch executives say they had to move to China to lower expenses. Of special concern was the cost of

a labor at its factory in Ohio.

b taxes.

c shipping.

d adhering to environmental regulations.

6. The biggest problem facing laid-off Levi’s workers is the fact that

a they are not entitled to retraining.

b unemployment compensation won’t start for a year.

c the jobs that are available are lower paying.

d they will have to commute to new jobs.

Upfront Quiz 2, page T E 5

1. (b) outsourcing.

2. (c) factory workers.

3. (d) produce better jobs and pay in the U.S.

4. (a) lead to greater stability in these countries.

5. (a) salaries in Ohio.

6. (c) the jobs that are available are lower paying.

Joseph Kahn, the Beijing bureau chief of The New York Times, reported from Shenzhen, China, and Bryan, Ohio; Houston bureau chief Ralph Blumenthal reported from San Antonio. Additional reporting by the AP.

COPYRIGHT 2004 Scholastic, Inc.

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