Wednesday, June 23, 2010

The Cost of Protecting Ironing Board Makers

A Washington Post article yesterday discusses the 200 $15 per hour ironing board manufacturing jobs "saved" in the US from imposing 70%-150% tariffs on Chinese imports "dumped" on the US market. The article did interview someone not quite on-board with the program.

"It doesn't make much sense to force millions of U.S. consumers to pay higher prices for ironing boards to save 200 jobs," said Howard Rosen, an economist at the Peterson Institute who has organized efforts to get retraining programs for workers displaced by the offshoring of jobs. "It would make more sense to help workers move to other jobs."

Just how much do each of these jobs cost us? The company makes 720 per hour which comes to about ~1.5 million per year. It is unclear at what price the tariff is applied. The article claims a unit cost of $7 which is undoubtedly below the wholesale price. A typical board retails at Walmart for $55 which must be above the wholesale price. If one assumed the relevant price is $20 (a stab in the dark on my part) then annual revenue is about $29 million. At a tariff rate of just 70%, this would be about $12 million more than if we bought the "dumped" imports (more if there were an increase in sales). Or the higher prices paid by US consumers would imply that saving these jobs cost about $60,000 annually per job. This is about double the annual earnings of these workers. Amazing.

ADDENDUM

An anonymous commenter correctly noted that I linked to the wrong product. A better example would be this one at Amazon that retails for $25. In this case, my guestimated wholesale price of $20 is too high. If one used a $12 (or $15) wholesale price instead, the cost numbers above would be comparably scaled down by 40% (or 25%). This implies $36,000 (or $45,000) per job saved, still more than these folks earn.

6 comments:

  1. The "typical board" linked to is a rather high end toy made out of solid maple. A regular ironing board costs nowhere near $55.

    ReplyDelete
  2. You get the impression they make more than 1.5 million boards; the end of the article mentions a day shift supervisor meaning there is a night shift supervisor: at least two shifts. Assuming 40 hour work weeks at 50 weeks a year and thats 720*40*2*50 = ~2.9 million boards. That roughly doubles the cost of each job kept in the US.

    ReplyDelete
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