Florida Teacher Certification Examinations (FTCE) Subject Area Practice Test

What is the primary reason for US companies relocating factories overseas?

1. Access to advanced technology

2. Government subsidies

3. Cheaper labor force

4. Proximity to resources

The correct answer is: Cheaper labor force

The primary reason for U.S. companies relocating factories overseas is the availability of a cheaper labor force. This drives many companies to reduce manufacturing costs significantly, thereby increasing their competitiveness in the global market. By hiring workers in countries where wages are lower than in the United States, companies can realize substantial savings on labor costs. This is particularly critical in industries where labor constitutes a significant portion of overall expenses. The move enables companies to either lower prices or increase profit margins while maintaining production levels. Other factors, while relevant, do not carry the same weight in influencing the decision to relocate. Access to advanced technology is important but often can be maintained from a distance or through partnerships rather than requiring physical relocation. Government subsidies can be attractive but are not as universally available for relocation decisions. Proximity to resources can enhance manufacturing efficiency, but location is often chosen based primarily on cost considerations. Thus, the cheaper labor force stands out as the principal motivator for many businesses seeking to optimize operational expenses.