The comparative cost advantage of taking your business to low-wage countries such as China or India, where unit labor costs in manufacturing are 20 percent lower than in the U.S., are often not the bargain they seem when wages are adjusted for low productivity, according to a report released today by The Conference Board.
This is also true of decisions to locate in Mexico, Central and Eastern Europe rather than in North America and Western Europe.
"One critical lesson for businesses that benefit from one-time labor cost benefits when investing in 'low wage' countries is that productivity gains from new technology and innovation have to keep pace with often fast rising wages of skilled and semi-skilled workers or the 'cost advantage' begins to erode," says Bart van Ark, Director of The Conference Board international economic research program and co-author of the report with The Conference Board Director of Global Demographics, Judith Banister, and Economist Catherine Guillemineau, formerly of The Conference Board.
See full Press Release.
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