There was a time when the phrase “Made in the USA” applied to almost every product put out on store shelves in the United States. That was when the economy centered around the USA and the nation was the leading importer and exporter of goods and services. Nowadays, however, those days can be a fuzzy memory. Products tout their American manufacture as a special designation, and it’s been a general complaint that traditionally US-based jobs have gone to support foreign economies.
Outsourcing, or sending jobs overseas to save on the cost of wages and manufacturing, picked up pace in the late 1970s and really gained momentum in the 1990s. As economies in countries like China and India began a period of explosive growth, American jobs slowly trickled overseas and left people wondering where their “Made in the USA” products had gone. Luckily, times are beginning to change. The jobs are coming back. But why?
Coming Home to America
In the late 1990s, companies added two jobs at home for every job sent overseas. By the next decade, that ratio slipped just under 1:1. There were 2.4 million jobs added overseas and 2.9 million cut back home. As investors pressured companies to cut costs and bring back higher profits, the pace picked up. As the numbers indicate, such a vast amount of outsourcing was detrimental to the American employment rate.
But something has changed in the past few years. Many of these same companies are finding out there really is no place like home. A fact sheet released in 2012 suggested companies were coming back from overseas for the same reasons many of these firms left the United States in the first place. As wages rose in the USA, companies looked for places where these same jobs could be performed for much less. As wages in foreign countries rise and US wages stagnate, it makes sense for businesses to bring their manufacturing back to the home shore.
Companies Doing Their Part
The nation’s largest retailer, Wal-Mart, has committed to bringing hundreds of millions of dollars in manufacturing back to the USA through production agreements with some of the companies that make Wal-Mart’s in-store products. A Washington Post article stated Kent Bicycles would build a plant in South Carolina after being overseas with its production since the 1990s. As there are increasingly numerous incentives to return, such as tax breaks, companies eager to find ways to save money are doing their part to “get a piece of the pie.”
Car manufacturers such as General Motors and Ford have opened up shop at some plants long closed or converted into other uses. Forbes published an article predicting the end of Chinese manufacturing, asserting that one million robots would be added to plants over several years’ time because Chinese labor had gotten too bloated and expensive.
Tesla, makers of an in-demand fully electric car, have manufactured all of their vehicles in the tech-rich Silicon Valley area of California outside San Francisco. This is in part due to Tesla being founded in San Carlos, so one could say that Tesla is staying true to its West Coast roots. Their development facility employs 350 workers, with the possibility of going up to 650 if demand warrants.
Companies such as Caterpillar, whose industrial equipment employed many in the “Rust Belt” of Illinois, Iowa and Michigan, are coming back to find jobs that cost less for the company and offer fewer benefits. Instead of returning to jobs in the Midwest, however, Caterpillar is relocating to states such as Texas and South Carolina. The corporate tax environments there are friendlier than others. Illinois in particular is having trouble attracting job creators due to higher taxes and higher regulations, whereas southern states are using less regulation and lower taxes to attract business.
A Trend, or Something Else?
Time will tell if this is merely a cycle or the beginning of a new manufacturing era. Basic competition is the name of the game, and the pendulum has swung back to the US because of the hardworking sensibilities of American citizens. As the face of the world economy continues to grow and change, the return of the American worker will prove a force in creating jobs at home, strengthening the US economy and creating safe products that people want to buy.
This article was written by Richard Craft, an MBA student who hopes to help you understand economics and business. He writes this on behalf of Workhorse Power, your number one choice when looking for manufacturing products to help you with your projects. Check out their website today and see how they can help you!