Is the "Made in America" Campaign Really Bringing Jobs Home?

Source: C.G.P. Grey

It's no secret that U.S. jobs have taken a hit over the past 20 to 30 years, a situation often blamed on offshoring -- the practice whereby American manufacturers send formerly domestic-based jobs overseas to save on labor costs.

Lately, there has been a push to bring back at least some of those manufacturing jobs, with megaretailer Walmart at the forefront of the "Made in America" campaign. What effect, if any, is this rallying cry having on the economy -- and unemployment?

Capital flight changed the employment landscape
U.S. Manufacturing peaked in 1979, according to the Bureau of Labor Statistics, when there were more than 19.5 million people working in that sector. Thirty years later, that number had shrunk to approximately 11.8 million, after manufacturing suffered another big drubbing in the recession of 2007 to 2009. During the 2000s, it is estimated that the U.S. lost at least 33% of its manufacturing jobs, with 75% of the job losses concentrated in the durable goods area.


Over the past few years, there has been a renaissance of sorts, with a strengthening "Made in America" movement, featuring pledges by companies such as Apple, Google, and General Electric to "reshore" previously outsourced jobs. There is even a group called the Reshoring Initiative, which endeavors to aid companies in their mission to bring U.S. jobs back home.

How's it been working?
Against the 6 million manufacturing jobs lost during the years 2001 and 2009, the reshoring movement hasn't made much of a dent: just 50,000 outsourced jobs have migrated back since 2010, according to the Reshoring Initiative. Despite the push, hauling back a sizable number of those jobs just isn't in the cards.

Why not? The answer lies in change wrought over several decades, whereby automation and increased productivity have forever reduced the number of factory jobs required for the same level of output. A recent article in The New York Times gives a sobering example: A yarn factory now produces with 140 workers the same amount of product that would have required over 2,000 workers in 1980.

Another issue is the simple fact that workers have not be able to keep up with the type of work required for these jobs, since so few stayed put over the last 30 years. This means that factory jobs don't have a ready pool of experienced employees from which to staff their plants -- keeping these factories from gearing up quickly.

The real reason for reshoring: costs
Despite the pitfalls, the return of some manufacturing jobs is good news. And even though 64% of respondents in a Gallup poll earlier this year said they would be willing to pay more for products made in the U.S., patriotism is not the main reason companies are beginning to bring back the jobs. The real reason, of course, is cost.

Labor costs were the primary reason for offshoring, but rising Chinese wages are making the U.S. look attractive again. While wages here in the U.S. are still higher than in Asia, rising travel and shipping costs in China, in addition to escalating energy prices, factor in, too. Add in the convenience of being closer to your primary market -- and the higher quality control available at home -- and moving jobs back makes economic sense.

Although the unemployment rate dropped to 7% recently, the number of jobs in manufacturing hasn't changed substantially since February of this year, according to BLS. Still, some analysts predict that onshoring will continue, with 30% of currently imported goods being made domestically by the year 2020. For a job market just starting to heal from a bruising recession, that's definitely something to look forward to.

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The article Is the "Made in America" Campaign Really Bringing Jobs Home? originally appeared on Fool.com.

Fool contributor Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, General Electric, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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jdykbpl45

Not if Obama and the democrats can help it.

December 30 2013 at 9:23 AM Report abuse +1 rate up rate down Reply
Sandy Montalbano

The not-for-profit Reshoring Initiative www.ReshoreNow.org tracks all reported and some private cases of reshoring and now concludes that about 80,000 manufacturing jobs have been reshored since Jan. 1, 2010.

Reshoring is the best strategic move for many companies due to rising wages in Asian countries, sourcing risks due to long supply chains, flexibility to respond to customers' changing needs, intellectual property risks and the benefits to innovation.

According to the Harry Moser, founder/president of the Reshoring Initiative, new offshoring is down by 70% to 80% and new reshoring is up by 1,500%.

Reshoring has grown rapidly since 2010 and offshoring is slowing to the extent that the two processes are about in balance for the first time in decades!

Repeated surveys by Boston Consulting Group, MIT Supply Chain Forum, MFG.com, Deloitte and others consistently show a sizable and growing percentage of companies deciding to reshore at least some of their production and sourcing.

If companies consistently evaluate all of the costs and risks, about 500,000 more manufacturing jobs would come back and the trade deficit fall by about 25%.

U.S.’ biggest advantage is being the world’s largest market. Our goal is to make 90% of what we consume instead of 75%. If we do that, we will stay the largest market for many years and thus offer companies an intrinsic advantage to manufacture here.

Current research shows many companies can reshore about 25% of what they have offshored and improve their profitability if they used TCO (total cost) instead of price to make their decision.

The not-for-profit Reshoring Initiative offers a free Total Cost of Ownership software that helps corporations calculate the real P&L impact of reshoring or offshoring. In many cases companies will find that, although the production cost is lower offshore, the total cost is higher. http://www.reshorenow.org/TCO_Estimator.cfm

I also recommend reading “ReMaking America” the AAM’s new book on manufacturings wealth and growth opportunities. http://americanmanufacturing.org/remake-america/ Harry Moser, founder of The Reshoring Initiative wrote an excellent chapter on Reshoring.

December 29 2013 at 7:45 PM Report abuse rate up rate down Reply