Are Manufacturers Coming Back to the U.S.?

Offshoring manufacturing jobs to China looked like the perfect way to cut costs a decade ago, but now companies that produce everything from computers to car parts are returning to the United States in growing numbers. Labor economists say the country needs to invest in more vocational and technical training programs so millions of jobless factory workers are equipped with the skills to benefit from this trend.

According to a survey by the Boston Consulting Group of executives at 106 manufacturing companies with $1 billion or more in sales, 37 percent said they are planning or “actively considering” onshoring. Among companies with more than $10 billion in revenue, that percentage shot up to nearly half. Leading the movement were companies that make rubber and plastic products, industrial machinery and electronics and computer equipment.

Manufacturing executives cite several factors driving their decision, said BCG senior partner Harold Sirkin. The first is that the cheap Chinese labor that looked so appealing 10 years ago isn’t so cheap anymore.

“Chinese labor has been rising at 20 to 50 percent a year since 2001,” Sirkin said. “We’re expecting it to be somewhere around $6 an hour in 2015.” While this is still low compared to the average $26 hourly wage BCG predicts an American manufacturing employee will earn in 2015, Sirkin added that the productivity of American workers is between 3.2 and 3.4 times higher than that of their Chinese counterparts. Also, American factories tend to be more automated, which means robots rather than paid workers do many tasks.

Rising energy costs also play a big role. The price of oil has jumped from around $25 a barrel at the turn of the century to around $100 today, which significantly increases the cost of shipping goods from Asia.

Read the rest Via:msn

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