Tuesday, June 22, 2010

How Gov't. Created The Ironing Board Monopoly

WASHINGTON POST -- There is one factory left in the United States that manufactures the basic ironing board, and its survival against Chinese competition demands unrelenting, production-line hustle. The company survives in part because it convinced U.S. trade officials that Chinese firms were unfairly dumping ironing boards into the United States at less than fair-market value; in response, the United States levied anti-dumping taxes of 70 to more than 150 percent on its Chinese rivals.

But imposing tariffs on foreign goods also elicits loud protests, and not just from the foreign manufacturers who face the burden. Some U.S. retailers say that the tariffs have given the American factory, long the market leader in the United States, a near monopoly on ironing boards. And economists say that the tariffs push up prices for American consumers, who buy an estimated 7 million ironing boards each year.

Some economists have also questioned whether such tariffs amount to good U.S. policy.  "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."
MP: Isn't this an example of how government trade policy created an anti-consumer, anti-competitive monopoly? Shouldn't the Department of Justice investigate?

HT:
Steve Bartin

19 Comments:

At 6/22/2010 9:53 AM, Anonymous Rand said...

I used to live in Seymour, Indiana. I always buy the ironing boards made there. Chances are that someone I knew (or a relative of theirs) works in that factory.

 
At 6/22/2010 10:10 AM, Anonymous gettingrational said...

"How Gov't Created the Ironing Board Monopoly"

What Monopoly? The website for China's main conduit to the U.S. market, WalMart, features Whitney Designs Ironing boards very prominately. Whitney Designs was the aggreived "U.S." company that was supposedly shut out of the U.S. market.

 
At 6/22/2010 12:16 PM, Blogger Richard said...

Hold on:

200 people make 720 ironing boards per hr. The pay is up to $15/hr.

That means 200*15/720 = $4.17 per board.

Allow for the same in material and equipment/housing etc: $8.34

Maybe a buck or two for transport etc: 10$ for an ironing board.

Seems to me somebody is siphoning off some profits here.

 
At 6/22/2010 1:11 PM, Anonymous Rand said...

Richard:

That's $10 to the wholesaler. The wholesaler sells it to the distributor for $15 who then sells it to the retailer for $20 who then sells it to you for $30.

 
At 6/22/2010 2:19 PM, Anonymous geoih said...

Cost has nothing to do with price. Cost determines your profit (or loss). Price is set by demand and supply.

 
At 6/22/2010 3:01 PM, Anonymous Anonymous said...

Well said, geoih: and spot on!

Hieronymus

 
At 6/22/2010 3:24 PM, Blogger sethstorm said...


Some economists have also questioned whether such tariffs amount to good U.S. policy. "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.

Except for the fact that the retraining does nothing for the expenses outside of the specific retraining. Training as a part of a secure(read: non-temp work) job is more specific and targeted.

Second of all, some of that retraining gets focused to very limited parts of the jobless versus the whole set(and for arbitrary reasons). Usually it is the few cases where it might lead to actual work.

Jobs, then retraining.

 
At 6/22/2010 4:25 PM, Blogger Ron H. said...

sethstorm said: - "
Jobs, then retraining."


Do you mean someone should hire you for a job you aren't qualified to do, pay you just for showing up, then retrain you on top of that?

Well, at first I was skeptical, but believe it or not, I have found some companies willing to do just that:

Here, here, and here.

I have also seen numerous signs at freeway offramps in my area indicating that real estate investors are seeking apprentices. There may be some in your area also.

Oh! And don't forget the Federal Government. We have recently hired a Chief Executive with no proir experience or training of any kind, pertinent to the job. He is training himself as he bumbles along. He has 942 more days to acquire any semblance of skill.

There appear to be a number of high level jobs in the current administration held by people with no qualifications, so you might consider a government job.

 
At 6/22/2010 5:41 PM, Blogger sethstorm said...


Here, here, and here.

Save your snark. If providers of opportunity are insistent on the qualifications, the person will be trained to meet them. The rest will be dispensed with and removed.

If someone is complaining about qualifications in the middle of over 15-20million, the last thing they should be doing is making those people longer-term. They're now adding the qualification of "must already be employed" on top of other things.


There appear to be a number of high level jobs in the current administration held by people with no qualifications, so you might consider a government job.

Well, those are politically-dependent temporary positions. Including the President.

Government contractors on the other hand, have no problem burning through taxpayer dollars. Then restricting the work (and clearance sponsorship) to a small subset of US citizens.

Some will even pay for you to commute across the country on commercial airlines(versus private sector forced relocation) like you were driving to work.

 
At 6/22/2010 7:42 PM, Blogger sethstorm said...

As for the false float by China - they're doing it to temporarily appease, not permanently change policy(what the US really wants). They're scared of the US enacting a tariff and buying time until China has a better negotiating position.

 
At 6/22/2010 10:10 PM, Anonymous Anonymous said...

just shows, you can't have a monopoly without government collusion.

 
At 6/23/2010 7:50 AM, Blogger juandos said...

Hmmm, what I find a bit shocking is that in this age of perma-press clothes people still have ironing boards...

 
At 6/23/2010 9:12 AM, Anonymous CompEng said...

I'm always irked to read a quote like this: It would make more sense to help workers move to other jobs."

Do we have any real sense how to do this at all? If we did, protectionism and most of the fear around economic effects would scarcely exist. The most interesting divergence among liberals and conservatives comes down to the point of who should own what portion of this problem, the individual or the "collective".

 
At 6/23/2010 10:18 AM, Blogger Michael Ward said...

The company makes ~1.5 million per year (720 / hr * 40 hr/wk * 52 weeks). It is unclear at what price the tariff is applied. The wholesale price is going to be between the unit cost of $7 and the retail price of $55 at Walmart. If one assumed the relevant price is $20 (a stab in the dark) then annual revenue is ~$29 million. At a tariff rate of just 70%, this would be ~$12 million more than if we bought the "dumped" imports. Or the higher prices paid by US consumers would imply that saving these jobs cost ~$60,000 annually per job or double the annual earnings of these workers.

 
At 6/23/2010 3:13 PM, Anonymous gettingrational said...

Michael Ward, Your financial analysis is only on the direct line workers. What about office staff? The local businesses? The suppliers of inputs into the manufacturing? I am sure there are other associated fiancial losses also.

Where did you get the 70% tariff figure?

 
At 6/23/2010 7:43 PM, Blogger Michael Ward said...

gettingrational: The Post article (and the blog post) indicate tariff rates of 70-150%.

You are right that there are effects on all input suppliers including white collar workers. We usually worry about the loss when the alternative to supplying this firm is considerably worse. A 55 year old line worker may have few job alternatives. He may have to take a job that pays only $10 per hour implying a $10,000 annual loss. But office staff skills transfer to other jobs more easily so the losses are smaller. Same with materials suppliers. As for local businesses, for technical economic theory reasons, including the reduced business to them from workers who lose their jobs would mostly be double counting the lost income to the workers.

 
At 6/24/2010 11:07 AM, Anonymous Anonymous said...

Even with the tariffs, ironing boards are cheap. The bigger problem for this manufacturer, and manufacturers in China, too, is that the ironing board market is not a growth market. Remove the tariffs and you'll probably end up with very few ironing board manufacturers anyway -- because there isn't a substantial market that can support real competition. Women working outside the home, the increasing use of fabrics that do not require ironing, the proliferation of inexpensive laundry services, plus, economic factors leading to decreasing mobility and against new household creatiion in the US, all contribute to decreasing demand for ironing boards. Not to mention that a towel and any flat surface can work just as well as a manufactured board for most of the ironing tasks required by the modern household, plus, ironing boards last forever. For the last 30 years I've been using the same ironing board that my mother purchased 20 years earlier.

 
At 6/24/2010 1:48 PM, Blogger Ron H. said...

Michael Ward said: - "Or the higher prices paid by US consumers would imply that saving these jobs cost ~$60,000 annually per job or double the annual earnings of these workers."

It would appear that we got off cheap in this instance. If memory serves, most jobs saved by tariffs cost upward of $200k.

 
At 7/10/2010 12:53 PM, Anonymous Anonymous said...

I am a former employee of the Seymour plant. It was a sweat shop. The pace that they force the workers to maintain is way beyond what normal people should have to do. There was always a lot of "over use" and work related injuries and the company didn't care. It was a "win at all costs" attitude from the management. The case against China was a total farce- HPI was importing just as much product from China as any of their competitors. A LOT of money went under the table on that one. It mostly boiled down to a battle of egos between the HPI management and the CEO of their main competitor who used to be the VP of sales for HPI. Time will tell and the truth will be exposed...

 

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