China's rising labor costs a boon for U.S. manufacturing

Don't look now but job creation in the U.S. may come at the expense of China. The purveying thinking up until now is that the U.S. continues to lose jobs overseas to countries such as China, where companies can pay workers much lower wages. However, a new study by The Boston Consulting Group, along with a KPMG report, state that China is losing its edge as a low-cost maufacturer as labor costs begin to rise.

BCG in its analysis states that the U.S. could gain two million to three million jobs over the course of the next five years as seven industries reach a "tipping point." At that point, "China’s shrinking cost advantage should prompt companies to rethink where they produce certain goods meant for sale in North America."

One of the seven sectors BCG identifies is furniture manufacturing. This has many implications for the hotel industry, specifically for the manufacturers that supply the hotels with their goods—from lobby sofas and casegoods to task seating. Currently, most furniture manufacturers outsource their construction to China and other non-U.S. territories. However, this new trend could bring those jobs back to the U.S., which will be a boon for the economy as a whole. We could be in for a renaissance of sorts, where decimated factories, shuttered since jobs moved overseas, could be back in business.

According to KPMG, cost alone is not the only factor driving some companies to source elsewhere. So is an aging population and labor shortages in China.

Manufacturers who deliver good for the hotel industry should keep close tabs on these trends. They could find that it will be cheaper to produce their goods at home.


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