Weekend Economists: What Goes Up....June 1-3, 2012

[Tansy_Gold]

14. It should be noted, however,

that "components" also have a labor cost.

The three cost "components" of any manufactured good:

Raw Material
Direct Labor (the direct cost of the labor hours spent making the thing)
Overhead (basically, everything else)

Very few manufacturing operations actually use "raw" materials; the processed or sub-assembled materials come from somewhere else and have a labor and overhead component as well.

Overhead, of course, includes everything from rent and utilities to office staff wages to fringe benefits to janitorial supplies to depreciation on equipment to advertising to shipping to industry lobbyists to. . . . everything.

Direct labor costs may be ONE reason companies have moved operations to cheaper labor markets, but that's not the only reason. The main reason is that ALL these costs are lower and contribute to a fatter bottom line.


Another reason is taxes and the fact that profits can be held in the hands of far fewer people.

Tim Cook is (probably, most likely, almost certainly) talking out his ass.