US Labor Costs Lower Than Elsewhere

More good news for US manufacturers as per unit of output labor costs decreased by 13% while increasing everywhere else. James Hagerty and Kate Linebaugh (Wall Street Journal, “In U.S., a Cheaper Labor Pool”, 1/6/12) report on manufacturing cost trends since 2000, and they are positive for US manufacturers.

Though the U.S. is hardly a low-wage country, it has become much more efficient, making it more attractive for global manufacturers. U.S. wage growth has been minimal, and manufacturers have found ways to use more-flexible work practices and increased automation to make the same amount of goods with far fewer people.

Other positives for manufacturers include a weaker dollar, and lower energy costs from the shale gas boom. High US taxes remain a problem. The authors predict a growing manufacturing sector with stable manufacturing employment.

This article confirms trends we have seen elsewhere – manufacturers are looking at the total cost of getting products to their customers. That means balancing low cost per unit / low wage imports with low inventory costs of lean production in local high productivity factories. Investment in automation is the key to high productivity – and that includes modern machinery as well as modern ERP software.

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