China is no longer a low-wage country

The Reshoring Institute has published key research on global labor costs in 12 countries, comparing production workers, machine operators, shop floor supervisors and managers. And the data shows that China can no longer be considered a low-wage country as its labor costs have risen significantly. The countries with the lowest costs in the study are now India, Mexico and Vietnam. While there are even cheaper regions in the world, the Reshoring Institute’s study focused on where most manufacturers are moving now that they have left China.

Despite significantly higher labor costs in the USA, manufacturers are also returning to America. “To be competitive in global markets and at home, US manufacturers need to automate production and redesign processes to reduce labor costs and make manufacturing more efficient,” said Rosemary Coates, executive director of the Reshoring Institute. “When you compare manufacturing in America to other countries, you have to consider the total cost of ownership and factor in all costs like logistics, quality, time to market, import duties, warehousing costs and geopolitical risk,” she said. “Our customers are often surprised to find that American manufacturing can be competitive when all costs are considered.”

The pandemic has changed almost every aspect of life around the world, including how and where we manufacture. Faced with global shortages and supply chain disruptions, companies have transformed the way they source and manufacture parts, subassemblies and finished products. An important factor in these changes is how many workers are paid in manufacturing.

“Our study showed that deciding where in the world to manufacture is complicated and requires a comprehensive analysis of labor costs, productivity, geopolitics, risk, customer location and market growth. With labor costs in China doubling in recent years, companies are now considering returning to America,” Ms Coates said.

With new funding and tax incentives now available through the Chips and Science Act, the Inflation Reduction Act and the Build Back Better Infrastructure Bill, relocating and expanding operations in America have quickly become popular and economical choices for American manufacturers.

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