A couple of weeks ago, I wrote about three dynamics that could alter the competitive landscape… including perceived product quality, and costs related to both energy and labor [see “Issues that could level the playing field between foreign and domestic products, prices,” 6/28/10].
This morning’s New York Times offered a story that adds perspective to the labor issue, at least with regard to manufacturing in China. Click here to read the story.
Implications: The fundamentals of supply and demand are at work, world-wide. If the demand for workers is greater than the available supply, the cost of that labor force is certain to rise, in one way or another. And that expense will eventually find its way into the price of the products produced by that workforce.
Cheap labor was one of the reason many companies moved manufacturing operations overseas. Another factor that facilitates foreign production is inexpensive energy… which allows both raw materials and finished products to be shipped great distances, affordably. If one or both of these core expenses rises too far (the cost of labor or the cost of energy), the impact on both consumers and the competitive landscape could be significant.
Stay tuned.
Mike Anderson
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