China is no longer a low-cost labor country

The Reshoring Institute has published major research on global labor rates in 12 countries, comparing production workers, machine operators, manufacturing supervisors, and managers. And the data shows that China can no longer be considered a low-cost labor country, as its labor rates have significantly increased. The lowest-cost countries in the study are now India, Mexico, and Vietnam. While there are even lower-cost areas of the world, the Reshoring Institute focused its study on where most manufacturers are moving to now, after leaving China.

Despite significantly higher labor rates in the U.S., manufacturers are also coming back to America. “To be competitive in world markets and at home, U.S. manufacturers must automate production and redesign processes to extract labor costs, and make manufacturing more efficient,” said Rosemary Coates, executive director of the Reshoring Institute. “When comparing manufacturing in America versus other countries, you must consider the total cost of ownership and include all costs such as logistics, quality, time-to-market, import duties, inventory carrying costs, and geopolitical risks,” she said. “Our clients are often surprised to find that when all costs are considered, American manufacturing can be competitive.”

The pandemic changed almost every aspect of life around the globe, including how and where we manufacture. With worldwide shortages and supply chain disruptions, companies have changed how to source and manufacture parts, sub-assemblies, and finished products. A major factor in these changes is how much manufacturing workers are paid.

“Our study has revealed that where in the world to manufacture is a complicated decision and involves a comprehensive analysis of labor costs, productivity, geopolitics, risk, where customers are located, and how markets are growing. With labor rates in China doubling over the past few years, companies are now considering moving back to America,” said Ms. Coates.

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, reshoring and expanding operations in America have rapidly become popular and economic choices for American manufacturers.

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