The excess structural cost burden facing the U.S. manufacturing sector more than offsets the competitive advantage it holds with regard to labor and capital costs. This “raw cost index” was just under $30 per hour in the United States, $3 less than the trade-weighted average of our nine largest trading partners. When the effects of higher structural costs are factored in, however, this cost advantage turns into a burden of $3 per hour. The excess corporate tax burden alone erases the U.S. manufacturing advantage, and the effects of employee benefits, torts, and regulatory compliance simply add insult to injury.
China, Mexico, and Taiwan enjoy significantly lower raw production costs, although they have risen rapidly since the initial study in 2003. In China and Mexico, these costs more than doubled, and in Taiwan rose by almost 50 percent, compared with a 23 percent increase in the United States.