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 expenses.
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