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US to reduce manufacturing costs

22 September 2012 09:08 (UTC +04:00)

Baku. Vahab Rzayev â€“ APA. Rising factory productivity in the United States, spurred by falling natural gas prices, could help the nation boost exports of products such as locomotives and factory machinery and add as many as 5 million jobs by the end of the decade, according to a new analysis.

High worker productivity and low energy prices driven by a surge in shale gas production will give the US a cost advantage in exports against Western European rivals and Japan in the coming years, according to a Boston Consulting Group report.

By 2015, those factors will make manufacturing costs in the US 15 percent lower than in Germany and France, 8 percent below the UK and 21 percent less than in Japan, the study projects. Factories’ costs in China will remain 7 percent cheaper than those in the US, however.
The competitive gap in some ways reflects the open US labor market, where companies can quickly add or cut workers to meet changes in demand, said Hal Sirkin, a senior partner at BCG and author of the report.

"In Europe and Japan, it’s relatively hard to lay people off, and because of that you have employees for a long period of time that you may not be able to use."

Besides the ease of adding or firing workers, lower wages and a readiness to move for work will make US factory labor costs 20 percent to 45 percent lower than prevailing costs in Western Europe and Japan by 2015, the study says.

US factory employment has grown by about 3.6 percent to roughly 12 million people from a 2010 post-recession low, a trend that could accelerate, BCG said.

The increase in part reflects a realization that rising shipping costs and wage inflation in China and elsewhere have made it cheaper to make products at home.