HEDGE THE LOW-WAGE WAGER

LOW WAGE RATES, PARTICULARLY in such highly publicized places as China and India, continue to drive decisions about where U.S.-based manufacturers locate their production facilities. Indeed, lower wage rates in China make that Asian nation more attractive to U.S. manufacturers than Mexico and other

Latin American countries, where better-developed logistics and infrastructure seemingly would provide a competitive edge, reveals a recent Lehigh University study on global sourcing. By one estimate, even after doubling between 2002 and 2005, the average manufacturing wage in China was only 60 U.S. cents an hour, compared with $2.46 an hour in Mexico. Ask companies what's the greatest pressure they're under and they "always tell us" cost reduction, states Robert Trent, an associate professor of management at Lehigh.

Yet, U.S. manufacturers-large, small and in-between-that let labor costs alone drive their production location decisions could be headed down the wrong road, perhaps even toward a dead end. "Just chasing low-cost labor is not Nirvana," stresses Anand Sharma, CEO and co-founder of TBM Consulting in Durham, N.C.