After years of hearing about jobs leaving our country for overseas — offshoring — there’s a growing trend in American business: Reshoring. From service industries to manufacturing, a range of incentives is leading companies to use American workers in new ways.
As NPR reported earlier this year, “As Overseas Costs Rise, More U.S. Companies Are ‘Reshoring.'” The piece reports that one Boston Consulting Group senior partner “says at least 200 companies have already returned, and there’s been a dramatic jump recently in the number of companies saying they’re seriously thinking about it. Sirkin says a huge factor has been rising wages overseas. Pay in China has risen at least 15 percent annually for the past few years. Wages in China are still comparatively low compared with the U.S., but there are other important factors.”
Much debate exists on how much — and in which sectors — reshoring will take hold. Bill Conerly, member of the Oregon Governor’s Council of Economic Advisors, chairman of the board of Cascade Policy Institute and senior fellow at the National Center for Policy Analysis, writes in Forbes: “Reshoring will continue, but not across the board. The greatest reshoring will occur in industries that benefit most from cheap natural gas and have access to global markets. These are chemicals and metals (both primary manufacturing and fabrication)… Reshoring will also continue for products that change rapidly, including fashion apparel and technology, but whose product value/weight ratios do not justify air freight. In addition, products that are made with relatively little labor will be more likely to reshore.”
On the other hand, Conerly writes: “Reshoring will be less pronounced in sectors with strong foreign demand for the products. Why shut down a Chinese plant if Chinese demand for the product is increasing? However, reshoring may occur in cases where total demand is rising. Instead of closing the foreign factory, a domestic U.S. factory will add to capacity.”
How did the trend begin? In December 2012, Conversations with Thinkers host Chris Riback spoke with Mark Coopersmith, a UC Berkeley Lecturer on Entrepreneurship. He is also active in companies of his own, some of which are on the cutting edge of the reshoring movement. (Originally broadcast 12-16-12 on The John Batchelor Show)