Manufacturing jobs keep coming back to the U.S.
Mark Perry points to an article in Financial Times, Business returns to US as Asia loses edge (free registration required).
Rapidly rising wages in China are changing the equation on where it makes sense to locate plants. Here’s what that picture looks like, in a comment from Mr. Bruce Cochrane, who opened up a furniture plant in North Carolina. The FT article says:
“Back in 2000, the average wage in China was about 50 cents an hour; now it’s $3.50,” he says.
Increase labor costs by a factor of 7 over the course of a decade? Yeah, that changes the equation.
Combine that with increasing regulation and burdens of doing business in China along with shipping costs, and the advantage of offshoring shrinks.
A major challenge will be retraining US workers so they can use the latest gee-whiz technology. The Financial Times article continues:
“People have to be retrained for the new machinery,” he says. “Even people with experience of computer-aided woodworking machinery are amazed at the new technology that’s available.”
It is a common refrain from US employers; the flipside of the improvement in productivity. Modern factories are now highly sophisticated, using automation and other advanced technology. This enables them to compete against producers in China while still paying much higher wages. The result, however, is that they need fewer people, and they tend to be more highly skilled.
Picking up new skills? That’s all we have to do?
In the country that made the tanks, ships, and planes to defeat the fascists? In the country that went to the moon? Six times?
We may need to spend some time retraining, but we can do it.
That is one of the points made by Walter Russell Mead in his post, New Outsourcing Destination: USA, which comments on the FT article above.
America rose to power on the back of its innovation and its dynamism, two qualities that are in more demand now than ever in an increasingly fast-paced global economy.
We got fat and lazy with decades of easy dominance after World War Two; the shock of new competition was a painful one. But America is responding in the traditional way: adjusting, reforming, innovating, bouncing back.
We have the underlying skills that the new economy needs. And all the competition? It makes everyone better. As we get over fat and lazy, look out.
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