Location advantages for American industrial bases
The low dollar rate has many consequences. One of them is that there is a location advantage for American companies with regard to operating costs compared to other countries.
This is one of the conclusions drawn in a study named „Competitive Alternatives“, which every two years compares conditions that are necessary to establish and maintain an industrial enterprise. Therefore, 136 cities in 10 countries in Europe, North America and Asia have been compared with each other. The current study reviews 27 cost factors such as personnel costs, taxes, real estate prices and energy costs. Other non-financial factors were also included that are important for competition.
Among these countries, Mexico took first place. Their advantage with low operational costs was as high as 20 percent compared to the second best. Canada, the United States and Australia followed closely behind. The improvement regarding cost factors has been most significant in the United States. Since 2006, the fall in value of the dollar has helped.
Among the European countries, France has the most efficient cost structure, which brings it to 5th place in global competition. England, Holland and Italy have similar operational costs which are between 7 and 8 percent higher than those in the United States.
Japan is known to be a relatively expensive base for industrial production. So it is not surprising that Japan took 9th place.
Germany is at the lower end of the ranking, hitting 10th place. Operational costs are here are up to 16.8 percent higher than in the United States. Superannuation of the population is another factor, a problem known as well in other European countries and also in Japan. The USA has a constant flow of Latino workers coming into the country.
However, the study does not only focus on mere operational costs. Quality of life is also an important factor when comparing international cities. This also includes education, crime statistics and the state of the real estate market. Therefore Mexico drops in its ranking because their high crime rates will influence decisions of companies looking for industrial bases.