First, the long-standing problem: Offshoring.
Middle class vulnerable to offshoring jobs
by Betty Beard, The Arizona Republic -- May 29, 2011
In the 1980s, American companies began relocating factories to other countries to take advantage of lower wage and production costs abroad. The U.S. lost about 2.2 million manufacturing jobs between 1990 and 2008, particularly in the electronics, aerospace and auto industries, according to the U.S. Bureau of Labor Statistics. Offshoring, as well as more-efficient manufacturing, contributed.
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A 2008 Harvard Business School study concluded that as many as 2 out of every 5 U.S. jobs could conceivably be sent abroad.
The effects of globalization are as vast as the world's new economy. Former aerospace engineers, IT programmers and call-center representatives in Arizona who saw their jobs move overseas can attest to that. And so can the radiologist in India reading X-rays for local hospitals, as well as other foreign workers who have gained jobs at the expense of Americans.
Arizona has not suffered as much from offshoring as factory-centric states such as Michigan, California and New York. But the loss of high-paying manufacturing positions can reduce U.S. wages and stunt overall job growth. Given the burgeoning of technology and the potential of the Internet, the list of jobs that might be offshored in the future could continue to grow.
"I call it the twilight of economics because we really don't know where we are going," said Ioanna Morfessis, a Phoenix-based economic-development consultant.
Now for some global trends underway, that may be sending some of those manufacturing jobs, back to the USA.
Is Michigan ready for manufacturing's comeback?
by Ron Dzwonkowski, freep.com -- May 21, 2011
You know how hard it is to buy stuff that's made in America, not by cheap labor in China? Well, that's going to change by 2015 as Chinese wages soar. The result will be a renaissance in U.S. manufacturing. All this according to a new analysis by the Boston Consulting Group (BCG), a respected and worldwide business strategy firm.
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The shrinking productivity gap
The BCG study shows that manufacturing wages in China are going up 17% a year on average. But productivity is stagnant and will stay so. Meanwhile, productivity among American workers was up about 2.5% last year. So the U.S. is doing more with less, while China is doing about the same with more.
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"Since wage rates account for 20%-30% of a product's total cost, manufacturing in China will be only 10%-15% cheaper than in the U.S. -- even before inventory and shipping costs are considered. After those costs are factored in, the total cost advantage will drop to single digits or be erased entirely," the company said in a news release.
I guess, "Quality of Life" is something we all want to achieve -- no matter on which shore you happen to live. Sooner or later, overworked workers are going to organize and to demand better, as they have been doing in China for a while now.
Sooner or later, the incentives for Offshoring Jobs to make a Quick Buck, will lose its sheen, for Business Owners.
Here's are some American Manufacturing Associations who are taking these global equalizing trends quite seriously.
A smart move apparently, if take into account the ever increasing costs of transporting those 'cheap goods' from one shore to another. Shipping costs that are destined to only go higher -- So "Near-Sourcing" your business only makes sense, in the long run ...
The future of American manufacturing, part two: What is the future outlook?
by Michele Nash-Hoff, San Diego News Room -- May 10, 2011
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Reshoring Initiative
The Reshoring Initiative is a way to return manufacturing jobs to the U.S. Harry Moser, Chairman Emeritus off Agie Charmilles in 2010, founded initiative. The Association for Manufacturing Technology, Association for Manufacturing Excellence, National Tooling & Machining Association, Precision Metalforming Association, and the Swiss Machine Tool Society support the Initiative.
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The main reasons for reshoring are:
-- Component/material prices increasing
-- Rising labor rates in China – 15-20% year over year
-- Transportation costs increasing
-- Political instability
-- Exchange rate variables as U.S. dollar continues to drop
-- Disruption from natural disasters
“As energy costs go up, transportation costs rise, and the distance that goods travel begins to matter,” said Paul Bingham, a trade and transportation specialist at Global Insight, a financial analysis firm in Massachusetts. “For low-value products that take up a lot of space, like furniture, for example, transportation costs can get quite high,” said Bingham. “And if you’re not saving enough money from using low-cost labor, it makes sense to bring your production lines closer to home.”
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“Inshoring” and “Nearshoring”
“Inshoring” refers to a company from a foreign country setting up a plant in the United States, and “nearshoring” refers to the same type of company setting up a plant in the nearby location of Mexico. For companies from India, the reasons for this “reverse offshoring” trend include the declining exchange rate of the Indian rupee versus the dollar, the decline in H1B visa availability, and the desire to be closer to their U.S. customer base. Other factors are the labor shortage in India for technology professionals and the tremendous upward pressure on wages.
Hopefully, for well-qualified American tech-workers, those H1B visa permits will stay on the decline, to keep these "Inshoring" trends on the rise.
The benefits to Companies to having "local help" are many:
Loyalty, Oversight, Customer Service, Local Knowledge, High Productivity, etc.
and above all -- to strengthen the Local and the National Economies -- and THAT is always good for Business.
An Economy that is working, is an economy that is Buying LOCAL products and services. And without such a strong Middle Class Demand, there are No strong Business earnings.