Yes, you read that right. Why is America bad for business? The fact is, America is bad for business. Not only is America bad for business, but also a small handful of states are also contributing to that label. Now that you have cursed and condemned this blog for making such an un-American and broadly inaccurate statement, let’s walk through a few thoughts about why this may be true and see if you agree.
Thoughts About Why
We have heard all about Making America Great Again‘ since the election and we have heard how our President-Elect will address the issues he believes will change things for business investment in America. The President-Elect has went so far as to intervene with Carrier to keep jobs in America. However, Ford has signaled that it will continue to move some production out of the country. Other businesses have also signaled they will also continue to move their production, without regard to the position on the President-Elect. Whether you agree with this intervention or analysis, here are some facts that do attribute directly to why business investment is moving:
Corporate Tax Rate – America has the dubious honor of having one the highest corporate tax rates in the world. The current rate is 35%.
Labor Cost – The cost of labor equals the cost of production and equals the final cost consumers pay. Whether you like it or not! When a country has lower labor costs, the savings can be passed on to consumers and make a company competitive.
Corporate Regulation – America has another dubious distinction of having regulation from local, state and federal governments that significantly restricts and inhibits business investment and operation. That is disturbing on many levels, especially since we are a republic that touts freedom for its citizens and respectively, their businesses.
Change the Tide of Business Investment
Whether you agree with our current political environment, these three issues are significantly affecting business investment in America. As long as we continue towards heavier regulation, higher taxes and increased labor costs, America will continue to lose business investment to countries that are focused on attracting and keeping business.
Connection with Lean and Six Sigma
We can help make American better for business by deploying Lean and Six Sigma techniques. This can improve customer satisfaction through increased value, eliminate waste which can reduce labor costs, and perform statistical analysis or conduct experiments that prove how our regulations are restricting business that prevent us from being competitive.
Get started by learning more about Lean and Six Sigma.
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Frank Green says
Hi
I’ve read with interest your article about the USA, and yes a number of key elements do play a major part in the final product cost. Australia has experienced this, as the US is now, especially with the car manufacturing industry. Over the years we have lost the likes of Nissan, Leyland & Mitsubishi, and now with the recent closure of Ford in October 2016. General Motors and Toyota are going next year too. This means our country will become an importer of vehicles.
The cost of labour is one element which is always a hot topic of discussion as well as the size of the available market/s. Here we are given an immense choice of vehicles, models, etc for this small market. I know when I was in California in 2004 to ride the SOLVANG with a buddy of mine from Santa Maria, I went to a Global brand dealership and was amazed at the difference in prices, so much cheaper (market size again)!
I’ve also seen how we, as a high labour-cost country, can compete with lower labour-cost countries through the introduction of more robotics in the production process. This, however, also means that there is an adverse impact on employment potential.
I’ve included the link to the recent Deloitte’s in-depth Global Manufacturing study which probably offers an opportunity to see where we are. Here it is:
https://www2.deloitte.com/global/en/pages/manufacturing/articles/global-manufacturing-competitiveness-index.html
The Conference Board International Labor Comparisons charts also provide a comparison, not only of labour, but of other key indices too.
https://www.conference-board.org/ilcprogram/
I was also fortunate to deliver manufacturing benchmarks from 2005 to 2013 to local regional manufacturers using the Comparison International program. The results show the importance of implementing Lean principles. Today, as the world ages and the costs associated with health dramatically increase, we see the rise of Lean Health Care.
Some years ago, one of my mentors gave me a white paper from Harvard Business Review, dated 1992, called “Staple Yourself to an Order” and is a great read. He told me to ask 3 questions of the team at each critical touchpoint: they were:- What do we do well here?What don’t we do well here? What can we do better here?
So I suppose one could dust off that quote: that everything old is new again.
Enjoy!