Ahjo (29.01.2004 – Jorma Antila*) Over the last few months there has been a lively debate in Finland about the export of industrial production capacity. I have also been asked how many engineering sector enterprises and jobs will be moving abroad.
It is impossible to answer this question with any precision, as there is no method that would enable such a calculation to be made. Decisions are always taken in individual cases, and their implementation follows no given scheme. In the absence of a direct response, however, it is possible to list certain factors that either increase or decrease the probability that a business will remove its production from Finland.
For brevity, I shall present two extreme examples: I give a general outline of one company that is highly likely to export its production capacity, and of another that is highly unlikely to do this.
The characteristics of the first enterprise are as follows:
- products are standardised, and are manufactured in long series,
- production work is divided into small stages,
- labour costs form a relatively high proportion of the end product price,
- almost all manufacturing is for export,
- the enterprise is large or medium-sized,
- the main markets are far away and the most rapidly growing markets are in remote locations,
- the key competition factor is low production costs,
- there are competitors all over the world,
- manufacturing requires no high technology input,
- R&D investment is relatively low,
- production line employees need little or no basic education in engineering, and can be trained for their duties in only a few weeks or months, and
- transport costs are relatively significant in relation to the price of the product.
The characteristics of an enterprise that is unlikely to move its production abroad are as follows:
- products are unique, are manufactured in short series, or can be readily customised,
- production work requires employees with basic engineering education,
- the proportion of labour costs in the price of the end product may be small or large,
- the market is mainly in industrialised countries,
- the competitors are mainly from industrialised countries,
- product quality is a key competition factor,
- high technology is an essential element in production,
- R&D investment is relatively high, and
- transport costs are a low proportion of the end price of the product.
These two examples are extreme cases, and most engineering sector enterprises lie somewhere between them. However, the examples may facilitate a rough estimate of the likelihood of someone's job remaining in Finland. The more the enterprise resembles the first example, the greater the risk of manufacturing capacity moving abroad.
It should be noted, however, that many enterprises resembling the first example will not move their production abroad, while others that seem more likely to remain in Finland may nevertheless choose to leave.
Most enterprises in the Finnish engineering sector may and will remain in Finland, insofar as they are able to maintain their real prices and competitiveness.
*Originally published in Ahjo, the magazine of the Finnish Metalworkers' Union, issue no. 1/2004. Jorma Antila is a researcher at the union.