Is U.S. Becoming a Low-Cost Country?

As Chinese wages are rising at 17% per year and yuan’s value increases, the U.S. is looking pretty good as a place to locate manufacturing plants, according to a new analysis by The Boston Consulting Group.

“We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015. As a result of the changing economics, you’re going to see a lot more products ‘Made in the USA’ in the next five years, said Harold L. Sirkin, a BCG senior partner.

“Since wage rates account for 20% to 30% of a product’s total cost, manufacturing in China will be only 10% to 15% cheaper than in the U.S. — even before inventory and shipping costs are considered. After those costs are factored in, the total cost advantage will drop to single digits or be erased entirely,” Sirkin said.

Products that require less labor and are churned out in modest volumes, such as household appliances and construction equipment, are most likely to shift to U.S. production, the group says.

Does this mean Americans are less capable of performing intensive manual labor? And, what about the dollar to yuan wage similarity? Does the converging of labor costs mean manufacturing wages in America will be less?

Although those questions remain unaswered, the rest of the article titled Is U.S. Becoming a Low-Cost Country?can be read on Indusry Week’s webiste.

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