#648 – 4 Reasons Manufacturing Jobs Are Returning to the USAAug 15, 2017
We are continuing to see strong activity in manufacturing, especially expansions of existing plants. It is also encouraging to see that reshoring continues to impact the manufacturing sector.
4 Reasons Manufacturing Jobs Are Returning to the USA
Megan Ray Nichols, DesignNews.com
Manufacturing jobs are (still) being reshored to the US. Here are the main drivers behind this trend.
- Automotive and Electronics Industry Growth
The two industries that have relocated the most jobs back to the US are the automotive and electronics industries. This is partially because the size of these products makes it more difficult and expensive to transport them.
Advanced technologies are the most likely to be reshored, because they’re the most difficult to produce and often require highly skilled workers to make them. In the US, these workers are often easier to find, and companies can watch manufacturing processes more closely.
- Increased Labor Cost
One of the most common reasons for moving manufacturing jobs overseas is the cheap production and labor costs available there. Wages in other countries, however, have been rising, making outsourcing less lucrative. Wages in China, for example, more than doubled between 2005 and 2016, making production in China more expensive than in other middle-income countries and closer to the cost of production in high-income countries like the United States.
Around the world, wages adjusted for inflation are predicted to increase by 2.3 percent. North America, meanwhile, is expected to have smaller increases in salary. In the U.S., the number is just 1.9 percent. This means the gap between wages in Asia and the United States is closing.
When taking into account other cost factors, the cost of having plants in the US versus other parts of the world becomes closer to equal. Automation — though it has a reputation for destroying jobs — has made labor costs cheaper in the US, encouraging more companies to bring production back to American soil.
- Logistical Challenges
Logistical issues are another factor making America more desirable for manufacturing companies. Moving production overseas can complicate the supply chain, and shipping products and materials from overseas to the US can get expensive.
Dealing with foreign governments and regulatory environments, hiring foreign employees, and finding a location for facilities can also sometimes be a difficult challenge. Although manufacturers could purchase equipment that takes up 30 percent less floor space, for instance, they may be able to obtain more space for their plants in the US, which provides them with more flexibility.
- Lack of Skilled Workers
As manufacturing equipment becomes more advanced, companies need more technically skilled workers to operate and service it. Finding these kinds of employees can be difficult in some locations. For this reason, a number of manufacturers have decided to move their production back to America, where it is easier to find more highly educated workers.
This rising demand for more skilled workers has also caused wages to rise, especially in areas where finding these workers is more difficult. Some of the demand for skills has shifted to those who know how to work with advanced technologies that use automation or smart technologies.
These workers may get paid more, but because of the technology they’re using, they can get more done than an average worker. This enables manufacturers to hire fewer workers, which keeps costs lower and increases the appeal of bringing operations back to the US, where a larger share of their workforce can be highly skilled.
Although more manufacturing jobs have been coming back to the US, the numbers are certainly still not as high as they once were. By 2011, the United States had lost 6 million manufacturing jobs. The country gained back half a million of those jobs by the end of 2016.