The re-shoring of jobs. Fact of Fiction? Good Practice or Bad for Corporations?
The Economist Magazine recently polled its online readers with the question, Do multinational corporations have a duty to maintain a strong presence in their home countries? 54% responded yes, and 46% no, proving that the issue is far from settled in our national debate.
The term re-shoring refers to American corporations that have decided to bring some of their operations, and jobs, back to America. Several non-profit organizations and websites have taken up the cause of re-shoring, and the debate over whether American corporations have a duty to bring some of their jobs home.
The non-profit group The Reshoring Initiative (reshorenow.org), shares our mission to bring good, well-paying manufacturing jobs back to the United States. A June 26, 2014 article in the Wall Street Journal points to a reshoring initiative study which found that in 2013, 40,000 jobs returned to the U.S. from overseas, while the same number of jobs left our country.
Last year marked the first time in decades that the USA did not lose jobs through offshoring, which is a good sign. But the work now begins to try and bring the millions of jobs that left our shores over the past 20 years. For example, in 2003, 150,000 factory-manufacturing jobs were outsoured overseas, while only 2,000 of the same jobs came back to the USA. This trend continued year after year during the 1990’s and 2000’s. Finally, and for several reasons, that trend has stopped.
The Reshoring Initiative founder Harry Moser effectively argues that it is in the best interest of the corporations, and its shareholders, to maintain a strong presence, and employ, manufacture and invest, in their country of origin.
Moser and the Reshoring Initiative also argues that if American corporations properly factored in all of the costs of outsourcing, and not just the labor costs, then 25% of offshored jobs would come back to the USA with higher profitability.
A 2013 story by Ed Frauenheim at Workforce.com, discusses the trend of re-sourcing jobs back to America.
“There's an emerging consensus that the virtual workplace has its weaknesses, global collaboration has its limits and offshoring may have gone too far. In 2011, for example, The Boston Consulting Group published a report titled Made in America, Again: Why Manufacturing Will Return to the U.S. It concluded that China's manufacturing cost advantage over the U.S. is shrinking fast and that within five years the gap will virtually close for many goods consumed in North America because of factors including rising Chinese wages, higher U.S. productivity and shipping costs,” writes Frauenheim.
"Wage and benefit increases of 15 to 20 percent per year at the average Chinese factory will slash China's labor-cost advantage over low-cost states in the U.S., from 55 percent today to 39 percent in 2015, when adjusted for the higher productivity of U.S. workers," the consulting firm wrote. "Because labor accounts for a small portion of a product's manufacturing costs, the savings gained from outsourcing to China will drop to single digits for many products."
“Apple made a splash last December when it announced it would shift the manufacturing of one of its Macintosh computer products from China to the United States. Apple CEO Tim Cook said his company would invest $100 million to bring the manufacturing back to the U.S. this year. Concern about its reputation may have played some role in Apple's decision.”
There are several reasons for U.S. corporations to bring our jobs home. The moral responsibility or duty, if any, to employ the same Americans that buy your products. The financial incentives, when you look at the entire economic reality of offshoring a company’s operations overseas; and the public perception that may arise, of corporations taking advantage of the U.S. consumer without giving back in the form of jobs here at home.
We believe that Americans are ill informed on two subjects concerning outsourcing, offshoring and efforts to re-shore and bring our jobs home.
I—Who are the U.S. Corporations that have good records on keeping their jobs here, or have re-shored their jobs back home?
II—Who are the elected officials that have supported efforts to keep the remaining manufacturing jobs here, and who have voted for laws that attempt to bring some of the lost manufacturing jobs back to American shores?
In the weeks to come we will attempt to inform you of what corporations, and elected officials, are doing the right thing for the American people; and what corporations and elected officials, are not serving our best interests?