Cost Components

Labor costs typically represent the single largest location-sensitive cost factor. For manufacturing operations, labor typically represents 46 to 60 percent of total location-sensitive costs, while for non-manufacturing operations this range is typically 74 to 85 percent.

Labor cost comparisons are based on 42 job positions. Labor-related costs vary significantly among the countries examined.

Labor costs include wages and salaries, statutory benefits (including government pension plans, medical plans, etc.), and other benefits typically provided by employers. Combining these elements, total labor costs are lowest in Mexico, followed by Canada, the United Kingdom, and Australia.

Facility costs vary both by location and type of business operation:

• For manufacturing operations, rental costs for industrial facilities range from 2 to 7 percent of location-sensitive costs. Industrial facility rental costs are lowest in Mexico, followed by the United States and Canada.
• For non-manufacturing operations, office leasing costs range from 5 to 18 percent of location-sensitive costs. Office lease costs (triple net) are lowest in Mexico, followed by the Netherlands and the United States.

Transportation costs vary widely by industry and represent between 5 and 18 percent of location-sensitive costs for the manufacturing operations examined. Transportation costs vary by product and markets served, but tend to be lowest in the European countries and Japan, with the leading cost countries being the United Kingdom, Germany, and Japan.

Utility costs represent between 1 and 7 percent of location-sensitive costs:

• The lowest electricity costs are found in Canada, France, and the United States, but may vary significantly by region.
• Mexico, the United States, and Canada offer the lowest natural gas costs.

Taxes typically represent up to 14 percent of location-sensitive costs. Effective income tax rates, calculated net of generally-applicable tax credits, grants, and incentives, vary most significantly by business sector:

• For manufacturing operations, Canada offers the lowest effective corporate income tax rate, followed by the Netherlands and Australia.
• For corporate and IT services, Canada, the Netherlands, and the United Kingdom offer the lowest effective rates for corporate income tax.
• For research and development operations, Australia, Canada, France, the Netherlands, the United Kingdom, and the United States all offer significant R&D tax incentives, some of which may be refundable in certain situations.

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