The exchange rate has sharply altered the competitive nature for
manufacturing, making the U.S. much more viable. The latest Competitive
Alternatives analysis done by KPMG International shows minimal differences
between the U.S. and most of the other 11 countries in the study.
The company’s fifth study of business costs determines that the U.S. has
experienced the greatest improvement in its competitiveness since the last study
was performed in 2002. The survey, which provides financial analysis for
business expenses, compared 121 cities in 11 industrial countries in the U.S.,
Europe, Australia, and Japan. It did not examine low-cost manufacturing
countries such as China and Mexico.
“The U.S. is starting to appear cost competitive with the United Kingdom and
Europe,” says Stuart McKay, the KPMG manager who addressed attendees during one
of the Manufacturing Week technical conferences. In the overall analysis, the
majority of the countries were fairly close. Australia and Canada showed solid
advantages, while Japan and Germany had significantly higher operating
A key reason for the improving U.S. position was the sharp fall of the dollar
vs. the Euro in recent years. “In 2002, Europe had an 8-9 % advantage over the
U.S. that was changed by the change in currency values,” McKay says.
The U.S. has the lowest wages for unskilled, entry-level labor. But it also
has the biggest differential between those unskilled workers and the skilled
workers. That means manufacturing will often be less expensive here, while more
skill-based business tasks such as R&D will be closer to the U.S., which
serves as the baseline for all comparisons in the study.
In the U.S., the
past two years have seen a narrowing of the gap between major cities. San Jose,
CA and New York, NY are the most expensive, while the nation’s smaller cities
are typically the least costly, but the differences have narrowed since the
Sept. 11 terrorist attacks, McKay says.
The complete study is available at http://www.competitivealternatives.com/media/viewer.asp?id=newyork_02182004