Posts Tagged ‘energy’
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A recent New York Times article makes much of the fact that Chinese textile mills are now setting up shop in the U.S. South.
I wouldn’t bet on a great leap forward either in Chinese investments in the United States or in U.S. manufacturing, at least not in the foreseeable future.
However, as a recent study by the Boston Consulting Group shows, the existence of any Chinese investment in the U.S. manufacturing sector indicates both a rise in costs in China (based on increasing wages) and on a decline in costs in the United States (based, especially, on stagnant wages as well as low energy costs) in comparison to other developed countries.
Labor is one key to the growing U.S. competitive advantage. The U.S. has one of the developed world’s most flexible labor markets, ranking as the most favorable economy in terms of labor regulation among the top 25 manufacturing exporters. The U.S. also has by far the highest worker productivity among the world’s 25 biggest manufactured-goods exporters. Adjusted for productivity, U.S. labor costs are an estimated 20 to 54 percent lower than those of Western Europe and Japan for many products.
The big U.S. energy-cost advantage is a recent development. While industrial prices for natural gas have risen around the world, they have fallen in the U.S. by around 50 percent since 2005, when large-scale recovery from underground shale deposits began in earnest. Natural gas currently costs more than three times as much in China, France, and Germany than in the U.S.—and nearly four times as much in Japan. In addition to being an important feedstock for industries such as chemicals, low-priced shale gas has also helped keep electricity prices in the U.S. below those of most other major exporters. That translates into a sizable cost advantage for energy-intensive industries such as steel and glass.
Is there any wonder the economic elite in the United States, which is interested only in short-term profits, is opposed to both making the labor market less “flexible” and real climate-change legislation?
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