Wage inflation has outpaced productivity gains in most regions. Labor costs adjusted for productivity rose 21% in the U.S. from 2018 through 2022, for example, and 24% in China. Similarly, productivity-adjusted labor costs increased by 22% in Mexico and by 18% in India. Nevertheless, these two countries remain among the world’s most cost-competitive manufacturing sources, and Mexico is the most competitive near-shore option for the United States.
Research found that manufacturers are willing to pay more to make their supply chains robust and resilient to disruption. In the survey, executives said that they would give up, on average, more than 2% of gross margins to operate with sufficient labor and shorter lead times. They also indicated a willingness to pay more for better stability, greater ease of doing business, and more robust logistics infrastructure.