NCPA - National Center for Policy Analysis

Global Competition Seen Holding Down Prices

November 25, 1996

Credit global competition with keeping price inflation in check. Domestic producers are concentrating on cost reduction to compete with foreign companies, according to economist Ronald Talley of WEFA Group Inc.

  • In an international comparison of hourly compensation in manufacturing, the U.S. went from the top of the list in manufacturing costs in 1985, at $13 an hour, to number four last year at $17, according to Bureau of Labor Statistics data.
  • It's now behind Germany's $32 an hour, Japan's $24 and France's $19.

But since 1985, wages in China have grown to 25 cents from 16 cents; while in India's labor costs fell to 25 cents from 35 cents; Thailand's to 46 cents from 49 cents; and Mexico's to $1.51 from $1.59.

Economists see a number of other factors at work to control productions costs and consumer prices, including inventory reductions, weaker consumer markets, companies willing to accept lower margins and a labor sector more concerned with holding on to jobs than achieving higher wages.

Source: Claire Mencke, "Businesses Want to Raise Prices, But Competition Won't Let Them," Investor's Business Daily, November 25, 1996.


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