New-Japan Business Consulting
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The labour shortage in the United States is becoming more acute. Wage increases are not attracting people.

Labour shortages are becoming increasingly severe in the USA as the economy emerges from the Corona disaster and continues to expand. While a series of new plant construction projects have been launched in the automotive industry due to the Inflation-Reduction Act (IRA), which is a major factor in encouraging US manufacturing related to electric vehicles, many company executives are often heard to be scratching their heads as to whether the plants can operate according to plan.

The unemployment rate in July 2023 was as low as 3.5%, and furthermore, it is said locally that the tendency to avoid the manufacturing sector has become more pronounced since the Corona disaster. Some believe that wage increases in the service sector, such as restaurants, have strengthened the tendency among younger workers to avoid manufacturing, which is comparatively more physically demanding, even if the salary level is a little higher. In some regions, it is said that it is difficult to secure employees to work in factories, so although wages are raised and jobs are advertised, it is difficult to attract people in the first place.

Soaring wages are also a source of concern for companies. Labour shortages and difficulties in recruiting staff are also a concern, as is the hard-line stance of the United Auto Workers (UAW), including strikes by the United Autoworkers of America (UAW). Monthly wages for workers in Detroit, Michigan (general labourers with one to three years’ service) are already high at approximately USD 3,800 on an actual (average) basis, but there is strong pressure from the UAW to raise wages, and if wage increases continue at this rate, there is no denying that the business itself may become unviable.

Even in this labour market, many companies are moving forward with new investment projects due to the size of the business opportunities. On the other hand, when we spoke to people involved in the North American automobile industry (suppliers), we began to hear that they had transferred the production of some parts to their plants in Mexico because their US plants were seriously short of labour and could not attract workers even if they raised wages. The current labour shortage in the US also suggests that it is necessary to assume that the North American supply chain, including Canada and Mexico, will be re-organised over the next few years.