This week’s piece of interesting perspective on the industry and employment comes from Hal Sirkin, in the Huffington Post:
Wages in China are rising so rapidly that the insourcing vs. outsourcing calculus has changed. In 2000, U.S. wages were almost 22 times larger than those in China. By 2015, U.S. wages will be only four times larger. Adjusted for productivity, the differential shrinks even more. In the Yangzi River Delta, the epicenter of China’s skilled manufacturing workforce, the effective wage rate will be about 61 percent of U.S. wages in 2015.
At those levels, it makes sense to return manufacturing of a wide range of goods , with moderate levels of labor content and high logistics costs, to the U.S. For an automotive part, where labor contributes one quarter of total cost, the total cost advantage for China shrivels to less than 10 percent.
Of course, it’s always good to be wary of trend analysis, particularly over such a short period of time as the decade that Sirkin is looking at, but the overall tone of his piece is encouraging to those looking for good news in US Manufacturing.