19 April 2008
The ten-dollar disposable toaster
An analysis in The Economist about a year ago looked at outsourcing of jobs in the last decade or so, and how purchasing power changed over that same time frame. As you can imagine, the international competition drove wages down in a variety of industries in the US as jobs were transferred overseas. But while income was decreasing, real purchasing power increased, as goods and service became cheaper as a result of global production networks which could take advantage of opportunities in any corner of the globe.
An example of these cheap goods is a recently purchased ten-dollar toaster. Rather remarkable. The unit was manufactured in China and landed on the shelves of Walgreens, next door to my work.
A couple Fridays ago (while I was gainfully employed), bagels were purchased for the office staff. Unfortunately, the individual who had promised to bring a toaster forgot to do so. Enter stage right, the ten-dollar disposable toaster. I am unsure as to what the Walgreens' markup of the toaster was, though I am guessing between 20 and 50 percent. So minus their cut, 5-8 dollars paid for everything including the mining and smelting of the aluminum, construction of the toaster from component parts, the lumber which was turned to cardboard for the toaster's box, shipment from China to the US and more. Now the skeptic is probably rolling their eyes, as this marvel of globalization isn't particularly remarkable. Skeptical or not, the point is that we have grown accustomed to such low prices. We perhaps live in a Walmart-nation of rolling back prices, in which purchasing power increases even when wages stagnate. Let's not lose focus of the greater picture as our tunnel vision stares angrily at our paycheck which seems hardly able to keep pace with inflation.