Last Updated: February 12, 2026
Manufacturing Costs by State: The Complete 2025-2026 Breakdown
Where you manufacture in the United States matters more than most people think. The difference between operating a factory in Mississippi versus Connecticut can easily run $15 or more per hour per worker when you stack up labor, energy, taxes, and real estate. That gap can make or break a company's margins.
We compiled over 80 data points from the EIA, Bureau of Labor Statistics, Tax Foundation, Cushman & Wakefield, and other authoritative sources to give you a clear picture of what it actually costs to manufacture in each state. This covers industrial electricity rates, manufacturing wages, total compensation, tax climate, industrial rents, and hidden cost drivers like machinery prices and climate risk. Every stat links to its source.
$46.30
Total compensation per hour in manufacturing (Q2 2025)
8.54¢
Projected avg. industrial electricity rate (2026)
$9.12
National avg. industrial lease rate per sq ft (2025)
What's in This Report
Manufacturing Labor Costs by State
Labor is the single biggest line item for most manufacturers, and it varies wildly by geography. The national average for all manufacturing employees is $36.07 per hour as of December 2025. Production and nonsupervisory workers, who make up about 70% of the manufacturing workforce, earn $29.51 per hour. But those numbers mask enormous regional differences. A machinist in Mississippi might earn $18-22 per hour while the same role in Massachusetts commands $28-35 per hour.
The real kicker is that wages are only part of the story. Total employer compensation, including health insurance, retirement, and paid leave, averaged $46.30 per hour in manufacturing during Q2 2025. Benefits account for roughly a third of total labor costs. So when you're comparing states, the all-in number matters far more than the hourly rate on a job posting.
1. Average hourly earnings for all manufacturing employees were $36.07 per hour in December 2025, with 4.4% year-over-year growth. — FRED / BLS (CES)
2. Production and nonsupervisory manufacturing workers earned $29.51 per hour in December 2025, a 4.2% year-over-year increase. These workers represent roughly 70% of the manufacturing workforce. — FRED / BLS
3. Total employer compensation in manufacturing averaged $46.30 per hour worked in Q2 2025, with benefits accounting for about one-third of that total. — Amtec / BLS (ECEC)
4. Manufacturing workers earned an average of $106,691 in total compensation (pay plus benefits) in 2024, compared to $90,601 for private nonfarm workers overall. — Bureau of Economic Analysis
5. The average manufacturing workweek was 39.9 hours in December 2025, with overtime averaging 2.9 hours per week. — Bureau of Labor Statistics
6. The Employment Cost Index for manufacturing wages grew at approximately 3-4% annually through 2025, with total compensation costs rising at similar rates. — FRED / BLS (ECI)
7. Research projects that 1.9 million manufacturing positions could go unfilled by 2033, putting continued upward pressure on wages in specialized roles. — Manufacturing Institute / Deloitte
8. More than one-third of manufacturing executives cite workforce skills as their top talent concern as investment accelerates in automation, analytics, and smart manufacturing. — Deloitte 2026 Manufacturing Outlook
Manufacturing Wages by Top Cities
| City | Avg. Mfg Wage ($/hr) | Energy Cost (¢/kWh) | Commercial Rent ($/sq ft/yr) |
|---|---|---|---|
| Atlanta, GA | $23.97 | 6.54 | $7.00 |
| Houston, TX | $24.50 | 7.10 | $8.50 |
| Columbus, OH | $26.56 | 7.80 | $10.00 |
| Charlotte, NC | $23.31 | 6.71 | $8.00 |
| Detroit, MI | $27.92 | 8.20 | $9.00 |
Industrial Electricity Rates by State
Energy is the second-largest variable cost for most manufacturers, and it varies by a factor of 4x or more across states. The national average for industrial electricity is projected at 8.54 cents per kWh for 2026. But Louisiana might charge 4-5 cents per kWh while Hawaii runs north of 30 cents. For an energy-intensive operation like aluminum smelting, steel processing, or chemical manufacturing, that difference alone can determine whether a plant is viable.
The commercial rate (which covers smaller manufacturing facilities and offices) averages 14.12 cents per kWh nationally as of February 2026. Wholesale power prices rose more than 12% in the summer of 2025 compared to the prior year, driven by higher natural gas costs and surging demand from AI data centers.
9. The EIA projects industrial electricity prices at 8.54 cents/kWh in 2026, lower than commercial (13.5 cents) and residential (nearly 18 cents) rates. Industrial users pay less because they consume power in larger, more predictable quantities. — American Action Forum / EIA
10. The national average commercial electricity rate was 14.12 cents/kWh in February 2026, a 5.0% increase year-over-year. — ElectricChoice / EIA
11. The cheapest commercial electricity: North Dakota at 7.44 cents/kWh, followed by Idaho (8.19 cents), Texas (9.12 cents), Nebraska (9.58 cents), and Virginia (9.73 cents). — ElectricChoice / EIA, Feb 2026
12. The most expensive commercial electricity: Hawaii at 38.79 cents/kWh, followed by California (29.46 cents), Connecticut (23.89 cents), Massachusetts (23.40 cents), and New York (22.54 cents). — ElectricChoice / EIA, Feb 2026
13. Wholesale power prices across the US rose by more than 12% in the summer of 2025 compared to the prior year, driven by higher natural gas costs, inconsistent renewable generation, and rapid power demand from AI data centers. — EnergyNow / EIA
14. Nominal electricity prices were flat at 0.7% annual growth from 2013 to 2020, then jumped to 5.5% growth from 2020-2022 and are projected at 4.5% from 2022-2026. The post-2020 acceleration reflects fuel costs, grid modernization, and rising demand. — American Action Forum / EIA
15. The steepest commercial rate increases in the past year: New Jersey (+9.1%), Hawaii (+8.9%), Connecticut (+8.0%), Massachusetts (+7.7%), and Maine (+7.3%). — ElectricChoice / EIA, Feb 2026
16. States with the smallest commercial rate increases: North Dakota (+1.3%), Idaho (+1.6%), Arkansas (+2.9%), and Kentucky (+2.7%). These states benefit from diverse generation portfolios and ample fuel access. — ElectricChoice / EIA, Feb 2026
17. Natural gas fuels roughly 43% of US electricity generation. When gas costs rise, utilities pass those costs through to ratepayers, often within one to two billing cycles. States with pipeline access tend to have lower and more stable industrial rates. — American Action Forum / EIA
State Tax Competitiveness for Manufacturers
Tax policy plays a big role in where manufacturers choose to locate, and the Tax Foundation's 2026 State Tax Competitiveness Index gives the clearest picture of how states stack up. The ranking evaluates corporate taxes, individual income taxes, sales taxes, property taxes, and unemployment insurance. States without a major tax type tend to dominate the top of the list, but it's possible to rank well while still levying all the major taxes. Indiana and Idaho both do it.
18. The top 10 most tax-competitive states for 2026 (1 = best): Wyoming, South Dakota, New Hampshire, Alaska, Florida, Montana, Texas, Tennessee, Idaho, and Indiana. — Tax Foundation (Nov 2025)
19. The 10 least tax-competitive states: Hawaii (#41), Vermont (#42), Massachusetts (#43), Minnesota (#44), Washington (#45), Maryland (#46), Connecticut (#47), California (#48), New Jersey (#49), and New York (#50, dead last). — Tax Foundation (Nov 2025)
20. New Jersey has the highest-rate corporate income tax in the country, combined with some of the highest property tax burdens, an inheritance tax, and aggressive treatment of international income. — Tax Foundation
21. Seven states have no individual income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. This helps keep overall labor and living costs lower, which strengthens talent attraction. — Tax Foundation
22. North Carolina ranks #13 overall and #3 for corporate taxes, making it one of the most competitive southeastern states for manufacturers. Its corporate income tax rate is just 2.25%. — Tax Foundation
23. Texas ranks #7 overall despite ranking #46 on corporate taxes (its franchise tax) because its lack of individual income tax and competitive sales/property tax structures offset that weakness. — Tax Foundation
24. Indiana ranks #10 overall while levying all major tax types, thanks to competitive rates across the board: #7 corporate, #20 individual income, #14 sales, #41 property, and #5 unemployment insurance. — Tax Foundation
Industrial Real Estate & Warehouse Costs
Industrial real estate is a cost that varies enormously by market. The national average asking rent for warehouse and industrial space is $9.12 per square foot annually, but coastal California markets can hit $15-17 per square foot while Midwest locations may run $6-8. After years of explosive growth during the pandemic, the market has shifted. Vacancy rates hit 7.1% nationally in Q2 2025, the highest in over a decade, which gives manufacturers more negotiating power than they've had in years.
25. The national average asking rent for industrial/warehouse space was $9.12 per square foot annually in 2025, with a 2.6% year-over-year increase, down sharply from the 8-12% annual growth of 2020-2022. — Red Stag / Cushman & Wakefield
26. National industrial vacancy rates climbed to 7.1% by Q2 2025, the highest level in over a decade. This stems from speculative development during the pandemic that has now outpaced tenant absorption. — Red Stag / Cushman & Wakefield
27. The most expensive industrial markets: Orange County, CA at $17.42/sq ft, Los Angeles at $15.54, and the San Francisco Bay Area at $14.66. California markets occupy all top 3 spots nationally. — CommercialEdge
28. Mid-America markets run $6-8 per square foot annually, roughly half the cost of coastal alternatives. These secondary markets offer the most affordable manufacturing space. — Red Stag / Cushman & Wakefield
29. Smaller industrial facilities under 100,000 sq ft average $9.51 per square foot, roughly 31% higher than larger spaces exceeding 100,000 sq ft which average $7.26. — Red Stag / Cushman & Wakefield
30. The average industrial sale price was $135 per square foot in 2025 for purchase transactions, providing an alternative to leasing for well-capitalized manufacturers. — CommercialCafe
31. The rent premium on new industrial leases narrowed to $1.28 per square foot over existing leases, signaling that supply additions are catching up with demand. — Yardi Matrix (Oct 2025)
32. Triple-net (NNN) charges typically add $1-3 per square foot annually on top of base rent, covering property taxes, insurance, and common area maintenance. The true cost per square foot is always higher than the listed asking rent. — Red Stag Fulfillment
Best Cities to Start a Manufacturing Business (2025)
MIE Solutions analyzed over 50 US cities and scored each on a weighted index of affordability, talent access, energy costs, and business-friendly conditions. The results highlight a shift: the top cities aren't always the legacy manufacturing hubs. Atlanta, Houston, and Columbus took the top three spots, combining cost advantages with logistics infrastructure and workforce pipelines.
| Rank | City | Readiness Score | Key Advantage |
|---|---|---|---|
| 1 | Atlanta, GA | 80.3 | Lowest rents, strong logistics |
| 2 | Houston, TX | 76.0 | Large skilled labor pool, no income tax |
| 3 | Columbus, OH | 75.9 | Affordable, government investment |
| 4 | Charlotte, NC | 75.0 | Low taxes, skilled workforce |
| 5 | Raleigh, NC | 74.2 | Research Triangle R&D access |
| 6 | Detroit, MI | 71.2 | Deep industrial expertise |
| 7 | Dallas, TX | 70.5 | Strong talent pipeline |
| 8 | Las Vegas, NV | 69.2 | Low property costs, western gateway |
| 9 | El Paso, TX | 68.8 | Cross-border supply chain access |
| 10 | Austin, TX | 68.0 | Tech talent, university pipeline |
Source: MIE Solutions Cost of Manufacturing Index, 2025
33. Atlanta leads with a Manufacturing Readiness Score of 80.3/100, combining low energy costs (6.54 cents/kWh), competitive wages ($23.97/hr), and some of the lowest commercial rents in the dataset ($7/sq ft/year). — MIE Solutions
34. Texas dominates with 7 cities in the top 20 and 4 in the top 10, reflecting its diverse industrial base from heavy energy to advanced electronics and aerospace. Its lack of personal income tax helps keep overall labor costs lower. — MIE Solutions
35. Houston is projected to add 3,500 manufacturing jobs in 2025, with manufacturing being "the single largest contributor to GDP, accounting for $1 in every $7 of Houston's economic output." — Greater Houston Partnership
36. The Manufacturing PMI hovered below the 50-point threshold for much of 2025, registering 48.7% in August, the sixth straight month of contraction. This makes city-level cost advantages more important than ever for maintaining profitability. — Trading Economics / ISM
Total Compensation & Benefits
Hourly wage is just the starting point. When you factor in health insurance, retirement contributions, paid leave, and other benefits, the real cost of a manufacturing employee is about a third higher than their base pay. Manufacturing leads all sectors in the percentage of workers eligible for employer health insurance at 95%, and health care plans in the sector averaged $25,428 for families in 2025.
37. 95% of manufacturing employees were eligible for employer-provided health insurance in 2025, the highest of any sector. The all-industry average is 80%. — Kaiser Family Foundation, 2025
38. The average annual cost of a family health plan in manufacturing was $25,428, below the all-industry average of $26,993 in 2025. — Kaiser Family Foundation, 2025
39. About 33% of total manufacturing compensation is attributable to benefits (non-wage compensation), including health insurance, retirement, and paid leave. — Amtec / NAM
40. The average manufacturer had ~4.2% of positions unfilled in Q3 2025, with nearly 1 in 4 manufacturers reporting vacancy rates above 5%. These gaps increase overtime costs and reduce throughput. — NAM Q3 2025 Outlook Survey
41. Union membership in manufacturing stood at 7.8% in 2024. While union representation remains a minority, work conditions, scheduling, and advancement pathways increasingly affect retention and total labor costs. — Amtec / BLS
42. The total recordable injury rate in manufacturing was 2.8 cases per 100 full-time workers in 2023, higher than many other industries. Staffing gaps compound safety risk by increasing overtime, fatigue, and operational strain. — Amtec / BLS (SOII)
State-by-State Manufacturing Cost Comparison
Putting it all together, here's how the major cost factors line up for the top and bottom manufacturing states. Interest in domestic manufacturing has surged since 2020, and the labor market in each state shapes what's possible. The cheapest states to manufacture in tend to share a few things: low or no income tax, affordable energy from natural gas or hydro, available industrial land, and a workforce that hasn't been priced out. The most expensive states have the opposite problem, often stacking high taxes on top of high energy costs and premium real estate. Trade policy and consumer demand also play a substantial role in GDP by state, and many companies now evaluate these manufacturing operations costs on the Tax Foundation website before making site selection decisions.
Most Cost-Competitive States for Manufacturing
| State | Comm. Elec. (¢/kWh) | Tax Rank (1=best) | Industrial Rent Range | Income Tax |
|---|---|---|---|---|
| Texas | 9.12 | #7 | $6-10/sq ft | None |
| Indiana | 14.16 | #10 | $5-8/sq ft | 3.05% |
| Tennessee | 13.02 | #8 | $5-9/sq ft | None |
| Georgia | 11.44 | #18 | $6-9/sq ft | 5.49% |
| North Carolina | 10.09 | #13 | $5-8/sq ft | 4.5% |
Most Expensive States for Manufacturing
| State | Comm. Elec. (¢/kWh) | Tax Rank (1=best) | Industrial Rent Range | Top Income Tax Rate |
|---|---|---|---|---|
| California | 29.46 | #48 | $12-17/sq ft | 13.3% |
| New York | 22.54 | #50 | $10-16/sq ft | 10.9% |
| New Jersey | 18.78 | #49 | $10-14/sq ft | 10.75% |
| Connecticut | 23.89 | #47 | $8-12/sq ft | 6.99% |
| Massachusetts | 23.40 | #43 | $9-14/sq ft | 9.0% |
Sources: EIA via ElectricChoice, Tax Foundation, Cushman & Wakefield
49. Manufacturing represents 10% of the US economy and roughly 20% of capital investment. The cost differences between states directly affect where that investment flows. — NIST
50. Factory employment hit a five-year low in July 2025 nationally, but some states, particularly in the South and parts of the Midwest, saw employment growth as manufacturers relocated from higher-cost regions. — Reuters
Cite This Resource
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"Manufacturing Costs by State (2025-2026)." Manufacturing Lead Generation. February 12, 2026. https://manufacturingleadgeneration.com/manufacturing-costs-by-state/
When citing individual statistics, please also cite the original source linked alongside each data point.
Sources
- US Energy Information Administration (EIA), Electricity Data. eia.gov/electricity
- ElectricChoice, Electricity Rates by State. electricchoice.com
- Bureau of Labor Statistics, Current Employment Statistics. bls.gov/ces
- Bureau of Labor Statistics, Employer Costs for Employee Compensation. bls.gov/ecec
- Federal Reserve Bank of St. Louis (FRED). fred.stlouisfed.org
- Tax Foundation, 2026 State Tax Competitiveness Index. taxfoundation.org
- MIE Solutions, Cost of Manufacturing in 2025. mie-solutions.com
- Cushman & Wakefield, Q2 2025 Industrial Market Report. cushmanwakefield.com
- Red Stag Fulfillment, Warehousing Rates Guide. redstagfulfillment.com
- Amtec Staffing, Manufacturing Workforce Report. amtec.us.com
- National Association of Manufacturers (NAM). nam.org
- Deloitte, 2026 Manufacturing Industry Outlook. deloitte.com
- Kaiser Family Foundation, Employer Health Benefits Survey. kff.org
- American Action Forum, Electricity Prices Analysis. americanactionforum.org
- Yardi Matrix, US Industrial Market Outlook. yardimatrix.com