Wage rates are often the starting point for global manufacturing country selection and reshoring decisions. With new, pending, and existing tariffs, now is the time to reevaluate U.S. costs and potentially bring manufacturing back to America. Companies often compare costs in various regions of the U.S. to look for competitive economic locations.

What’s Related

The Reshoring Institute has published research on the minimum wages in the largest cities in each state in America.  While minimum wages do not paint the entire cost picture, this data is a starting point for further investigation.

High labor content vs. low labor content

The first step is to evaluate the amount of labor that goes into manufacturing a product. If a product has a high labor content in its cost structure, then the company producing this product would look for locations in low-cost/low-wage countries. Products with lower labor content—those products made in highly automated factories—have more location options, including some regions in the U.S.  For example, a company that produces apparel in a sewing factory, with lots of people sitting at sewing machines, would look for low-cost production environments in places like Indonesia, Vietnam, Bangladesh, El Salvador, and Honduras. However, a company producing textiles where fabrics are produced by machinery with very few employees has more location options, including within the U.S. Most products fall somewhere in between high labor and full automation. Thus, wage rates often become a critical decision factor regarding where to locate.

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