Trying to persuade locked-out workers in Canada to accept a sharp cut in pay, Caterpillar Inc. is citing lower wages elsewhere. But instead of pointing to the usual models of cheap and pliant labor, such as China or Mexico, it is using a more surprising example: the U.S.
Wage and benefit costs at a Caterpillar rail-equipment plant in LaGrange, Ill., are less than half of those at the company's locomotive-assembly plant in London, Ontario, Caterpillar says.
U.S. manufacturing labor costs per unit of output in 2010 were 13% below the level of a decade earlier as workers became more productive, according to the U.S. Bureau of Labor Statistics. The U.S. outperformed Germany, where unit labor costs increased 2.3%; Canada, where they rose 18%, and South Korea, up 15%.
Caterpillar, based in Peoria, Ill., wants to cut wages roughly in half at the Ontario factory, so it will be "cost competitive in the global marketplace," while ending what it calls "antiquated work rules" that limit production flexibility.
Global whipsawing. This is how they do it.
And on edit, I expect that some of the change in cost has to do with changes in exchange rates.
1. My experience with the issue of cheap companies not willing to pay their employees
is that they end up with what you would expect. People willing or needing to work for incommensurate pay or benefits have little or no motivation to go the extra yards. Lots of discipline, attendance and retention problems.
Good luck with your business model, US manufacturers.