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'Low-Cost' Economies Not So Cheap
This is the title of an article that appears today on IndustryWeek.com.
Once a full account is taken of unit labor costs output per worker across economies, the advantage is narrowed:
Mexico: No competitive advantage if productivity is factored in. Mexico's total wage costs were 11% of the average U.S. level in 2002. But because Mexican workers produce 10 times less than Americans per hour, the unit labor costs came out nearly the same.
Poland: Competitive disadvantage: industrial workers earn about 13% of the average U.S. salary but their unit labor costs come out much higher at 73%.
India and China: Competitive advantage: Total wage cost at less than 3% of the level paid to U.S. workers in manufacturing. Even with lower worker productivity factored in, unit labor costs in India and China are on average 80% lower than those in the United States.
Once a full account is taken of unit labor costs output per worker across economies, the advantage is narrowed:
Mexico: No competitive advantage if productivity is factored in. Mexico's total wage costs were 11% of the average U.S. level in 2002. But because Mexican workers produce 10 times less than Americans per hour, the unit labor costs came out nearly the same.
Poland: Competitive disadvantage: industrial workers earn about 13% of the average U.S. salary but their unit labor costs come out much higher at 73%.
India and China: Competitive advantage: Total wage cost at less than 3% of the level paid to U.S. workers in manufacturing. Even with lower worker productivity factored in, unit labor costs in India and China are on average 80% lower than those in the United States.