China’s losses are America’s gains — if we’re savvy about how to take advantage of them.
Harry Moser, founder of the Reshoring Initiative, delivered a message of how to bring manufacturing jobs back to America before an audience of Pennsylvania state legislators last week at the state Capitol, thanks to support from Dave Yarrish, of Springettsbury Township-based Nutec Group, and state House Speaker Mike Turzai (R-Allegheny).
Reshoring refers to bringing previously outsourced jobs back to the U.S. Moser came armed with statistics about how and where the movement is succeeding, and how Pennsylvania can capitalize on the trends.
As Chinese workers demand better compensation, American companies have been finding it profitable to bring manufacturing back to the U.S., creating new jobs at home, Moser explained.
Not every state is sharing equally in the bounty, however: In recent years, Pennsylvania ranked 19th in the number of reshoring jobs added, even though the state was 8th in overall manufacturing output, he said.
What Moser had to say may not please everyone. His vision raises questions not just about what manufacturers need to do, but about how government and educators may need to embrace difficult changes if the Keystone State is to sharpen its industrial edge.
1. Are four-year college degrees necessary?
College and university degrees became a must-have for upwardly mobile Americans during the post-World War II era, as well as the key to good jobs, good salaries and expanded networking opportunities.
Moser suggests that model needs to change.
The country has an educational imbalance that has resulted in an excess of non-technical graduates who lack the skills needed by manufacturers, Moser said, leaving those workers struggling with soaring levels of student debt and making less than they would in manufacturing.
Modern manufacturers have shifted toward high-tech skills and pay an average of 19 percent more than non-manufacturing jobs, Moser said, while 80 percent of associate degree holders make more than the median income for bachelor’s degree holders.
“Occupation, not degree level, determines salary,” he said.
2. Stop calling manufacturing jobs ‘trades.’
How we talk about manufacturing jobs matters, Moser said, starting with the language used by high school guidance counselors.
As four-year college degrees became the mainstream goal, manufacturing and technical jobs came to be called “trades” or “vocations,” and those terms took on negative connotations.
Moser describes them as “professions.” He hopes to encourage business, government and educational leaders — oh, and the media — to do the same.
His goal is to remove years of perceived stigma about manufacturing jobs, and to encourage high school students to keep an open mind when choosing career paths.
3. What’s so good about apprenticeships? Ask the Europeans.
In Switzerland, for example, 70 percent of high school students embark on internships at 16, Moser said. Those internships often are followed by apprenticeships with employers following graduation.
The result is that by the age of 20, Swiss youths have four years of hands-on training in their fields — a vital economic advantage for employers and employees in a country that has long been known for its tradition of high-quality precision manufacturing.
In America, by contrast, students who choose the apprenticeship route may not reach that stage until their early 20s or later — and sometimes do so by default.
Better apprenticeships would give good students here a practical foundation without the cost of a degree, leading to higher earnings at a younger age, Moser said.
“Here, too often, we get the kids who are told college wasn’t the right choice for them,” Moser said of American manufacturers.
“We get the D and C students,” he added, while Swiss companies “are getting a better class of student, and then they’re training them better.”
Moser is quick to point out that he’s not down on the American worker, but advocating for training our workers better and earlier.
“Our absolute best is as good as their absolute best,” he said of the Swiss, “but their average is dramatically better than our average.”
4. So, what’s going on with China?
The Asian superpower has done a lot of things right, but demographic shifts are making it less beneficial for American companies to offshore manufacturing jobs there.
China’s one-child policy has limited the supply of labor there, Moser said, and that has helped push up wages for Chinese workers, sometimes as much as 15 percent per year.
Those workers still earn less than their American counterparts. But as the gap narrows, companies are finding it financially and socially advantageous to reshore.
“Ten years ago, that was impossible because the Chinese were so much lower,” Moser said.
“The China which seemed indomitable 10 years ago now seems vulnerable.”
Also, there can be hidden — or ignored — costs to importing goods.
General Electric brought production of water heaters, refrigerators and washing machines back from China to a unionized plant in Kentucky, Moser said, investing $800 million and creating 1,300 jobs.
Among GE’s benefits were tax incentives and ease of collaborating with workers on new designs that helped lower retail prices. As well, the company had found that while the cost of Chinese-made products was 30 percent lower, their net cost actually was 6 percent higher when inventory and delivery problems were factored in.
5. The bleeding has stopped.
Moser’s analysis shows that while offshoring is still happening, reshoring is tipping the balance.
In 2003, about 150,000 U.S. manufacturing jobs went offshore, compared with 12,000 coming back. In 2014, 30,000 to 50,000 positions went offshore while 60,000 were reshored, he calculates.
6. Wal-Mart is doing it.
Love it or hate it, Wal-Mart is a trend-setter. And after years of taking heat for undercutting American retailers and producers by buying low-cost imported goods, the Arkansas-based juggernaut has begun a concentrated reshoring effort of its own.
“It’s their perception of what the consumer wants,” Moser explained.
In January 2013, Wal-Mart announced plans to purchase an additional $50 billion in U.S. products in 10 years, cumulatively amounting to $250 billion per year by the tenth year.
Data from the company’s suppliers show “items that are made, sourced or grown right here in American are already account for about two-thirds of what Wal-Mart spends to buy products for our U.S. stores — but there is room to do more,” the company says.
Moser calculates that by the tenth year, Wal-Mart’s program will have created about 300,000 American manufacturing jobs, and 1 million total jobs overall.
7. Yes, Central Pa. is doing it.
Moser, a former machine company executive, has previously cited Armstrong World Industries Inc. in Lancaster County and Unilife Corp. in York County among companies that have brought offshore jobs back to the region.
A more recent high-profile case is that of Bollman Hat Co., which used a Kickstarter campaign to help raise funds for a plan to bring manufacturing of the iconic Kangol product line from China to its Adamstown plant.
8. But consider this:
Moser’s statistics show that the top reshoring states between 2007 and 2014 are mostly in the South and Southeast: South Carolina (7,530 jobs), Texas (3,792), Kentucky (3,412), Georgia (3,145) and Tennessee (3,137) top the list.
Pennsylvania brought back 384 jobs during that period, he said.
There were groans from the lawmakers when Moser talked about how those states differ from ours: They tend to be right-to-work jurisdictions with lower taxes and lower wages.
Such factors do put the Northeast and parts of the Midwest at a disadvantage, but not impossibly so. Ohio (2,739 jobs), Michigan (1,742) and New York (1,165) also made the top 10.
So, is he suggesting Harrisburg slash taxes and radically revamp the state’s laws? Not necessarily.
“My concern is that Pennsylvania could do better,” Moser said. “I think if you had one thing you could do in this state, it’s more workforce development.”
9. Wait, there’s more:
Moser offered other suggestions for lawmakers and industrial resource center officials (IRCs are organizations like Mantec, Inc.), including:
• Target large importers with the reshoring message, and offer training and technical support via the IRCs.
• Help companies find Pennsylvania suppliers for the products they want to produce here.
• Help manufacturers sell to Wal-Mart.
• Help retailers understand the costs associated with stock-outs and overstocks that result from relying on imported goods.
• Accelerate skilled workforce training at the state level.
• Focus on reshoring and selling goods domestically as much as on exporting.
10. Can politicans force companies to reshore?
You just might have heard a presidential candidate or two talking about compelling corporations to bring jobs back to America.
“Legally, you can’t do it,” Moser said.
What can they do? Well, first there is education — expounding the cost benefits of reshoring and workforce development, as discussed above.
That doesn’t mean America can’t play a little hardball:
• The country’s leaders also need to focus on bringing the strong dollar down, perhaps as much as 30 to 40 percent, Moser said.
• Importing goods needs to be more expensive, Moser said, suggesting adoption of a value-added tax, as used in other countries.
• Finally, he said America’s corporate tax rates, at about 35 percent, are the highest in the developed world. Moser would drop them to 20 percent, “at least for manufacturing,” and eliminate all special deals.
