Perhaps the biggest stimulant to American manufacturing is the move toward reshoring. In recent years, companies have increasingly been bringing manufacturing jobs back to the U.S. from China and other countries. The practice received its most public boost in 2012, when General Electric announced plans to invest a billion dollars in an appliance plant in Louisville, Kentucky, reshoring four thousand jobs that had been in China and Mexico, and adding, over time, nearly twenty thousand factory positions at the plant’s regional suppliers. Walmart has also helped to stoke demand for U.S. manufacturing, thanks to an initiative, launched in 2013, to purchase an additional two hundred and fifty billion dollars worth of American-made goods by 2023, which it hopes will create as many as three hundred thousand new jobs.
Economists and manufacturing experts have assembled convincing statistics which demonstrate that these moves were part of a broader trend. According to data provided to me by the Reshoring Initiative, a nonprofit trade organization, in the past five years, about a hundred thousand manufacturing jobs have returned to the U.S. from overseas, sixty per cent of them from China. If you fold in new U.S. plant openings by companies headquartered elsewhere (that is, foreign direct investment in manufacturing), the number jumps to two hundred and fifty thousand. An additional fifty thousand jobs were saved when companies that had planned to go offshore changed their minds.
What’s more, thirty-one per cent of respondents to the Boston Consulting Group’s 2015 survey of U.S. manufacturing executives said that, in the next five years, their companies are likely to add factory capacity in the U.S. for goods sold domestically, while only twenty per cent were planning to do so in China. The share of executives saying that their companies were actively reshoring production had increased by nine per cent since the 2014 survey, and by about two hundred and fifty per cent since 2012.
Meanwhile, offshoring has slowed considerably. Harry Moser, the president of the Reshoring Initiative, told me that, since 2007, the annual increase in the number of companies offshoring has dropped from six per cent to two and a half per cent, and that, for the past couple of years, for every new job offered by U.S. companies overseas, an equal number of positions have been reshored. Plus, though it is impossible to tell how many of the new offshoring positions are aimed at producing products to sell in overseas markets, as opposed to back in the U.S., based on my interviews with multinational executives over many years, such sales increasingly comprise a high proportion of this activity.
For most businesses, the calculus in favor of reshoring or maintaining existing U.S. operations is obvious. Chinese hourly manufacturing wages rose about twelve per cent a year, on average, between 2000 and 2013. Add to that the ready availability of inexpensive oil and natural gas in the U.S., which was a boon for energy-intensive industries even before the plunge in petroleum prices, and the average cost to produce goods in the U.S. is only five per cent higher than in China, according to a separate Boston Consulting Group report.
But the decision to manufacture in the U.S. isn’t solely about dollars and cents. Rather, it’s a function of the quality of the U.S. workforce—its noteworthy productivity and its easy familiarity with lean-factory principles—as well as the need for companies to react quickly to changes in domestic consumer demand. As Jeff Immelt, the C.E.O. of General Electric, put it in 2013: “Today, the product is the process, more or less. If you look at an aircraft engine, the content of labor is probably less than five per cent. We have two hours of labor in a refrigerator. So it really doesn’t matter if you make it in Mexico, the U.S., or China. Today it’s really about globalization, not about outsourcing; it’s how do I capture markets faster than the competition?”
Even small businesses, which tend to depend on cheaper labor to remain viable, are seeing the wisdom in Immelt’s argument. John Strotbeck, a former Olympic rower and the founder and C.E.O. of the Philadelphia-based team-uniform maker Boathouse Sports, told me that his company tried a few years ago to start manufacturing some of its sports apparel in China, but brought the production line back to a factory in Philadelphia soon afterward. The main factor was the lead time from when a customer placed an order to delivery. “Six months, and today it is even longer,” he said, of timelines at Chinese factories. “Compare that to how fast we can be now: average from the date of the order to out the door is twenty working days. And our workers are flexible; they can work anywhere in the factory and on any equipment. If all of a sudden we get a spike in demand for Gortex outerwear, a labor-intensive product, we can shift more resources and take advantage of it.”
