January 02, 2004

US Competitiveness & Invisible Costs

From BusinessPundit & Fortune...

At 94, Peter Drucker still views things(reg. requried) differently than everyone else. His take on wages in the U.S. -

..the belief that labor costs are a main reason for producing outside the U.S. is justified for only a very small segment of industry.

Consequently, the industries that are moving jobs out of the U.S. are the more backward industries. The U.S. remains the cheapest place in the world to produce for many of the more advanced industries. I say that not because our wages and salaries are so low. They aren't. But employee benefits are much cheaper than in Europe, and American workers are more flexible. I don't just mean you can move people out of accounting and into engineering here;
My favorite part......

I mean physically moving people from Chicago to Los Angeles. Don't you dare try that in Germany. They won't go. That's one of the absurd byproducts of their huge and restrictive employee benefits: It's cheaper to allow someone to remain unemployed in the Ruhr than to move him to Stuttgart for a real job. The same thing is true in Japan.

So what I call "invisible" costs are quickly beginning to be more significant than direct labor costs. These are pension costs, benefits and health-care costs, and especially something nobody has yet assessed, which I call "reporting" costs, which are basically associated with complying with regulations, taxation, labor relations requirements, and the like.
Mr. Drucker is even wiser than his years