The initial logic of cheap labor, which drove jobs offshore for the past two decades, has begun to weaken—and this could be a good sign for the manufacturing industry in the US.

It’s true, labor is still cheap in some parts of the world, but talent is commanding a premium, particularly in those emerging markets where large, complex operations now require high-level management skill to lead their operations.

Development has been swift and dramatic, particularly in China and India, but skill gaps are harder to close. India has made rapid inroads to specialist education and has captured the information technology wave with incredible speed, but in the manufacturing space, skills and experience are still hard to find. And when they are found, they must be paid for accordingly.

Experienced managers in emerging markets command relatively high salaries, and in some cases are in excess of the cost of those skills in developed markets.

Across the board, wage costs are rising higher and faster in emerging markets than elsewhere, particularly in Asia where inflation is high. With China clocking up double-figure wage growth year-on-year for at least the past three decades, the flat labor costs in the US and other developed economies are looking increasingly attractive.

The larger pool of experienced, well-educated talent in developed markets is again looking like good value. And this could be one of the signs that things are looking up for the US light industrial sector.

This post belongs to Signs of Life: 4 Reasons US Manufacturing is Making a Comeback, a new ebook free for download.
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Photo Credit - Flickr®User - seier+seier