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Offshoring no longer pays: Economist “Special Report”

Many of the old benefits for offshoring manufacturing are drying up, leading to new incentives to return production to domestic factories.

Last week, we discussed a recent special report from notable newsmagazine The Economist. The report, called “Here, there and everywhere,” is an in-depth look at the shifting tides of global manufacturing, with many companies moving production back to domestic factories. We encourage you to take some time and read as much of the report as you are able.

Today we’d like to focus on a particular section, called “Coming home,”  dedicated to the trend of American “reshoring.” The article is particularly insightful because it offers a realistic assessment of the reshoring trend without succumbing to sensationalist propoganda for either side of the debate. The good news: the assessment is still generally positive. Here are some of the notes that we liked:

  • According to a survey conducted by Harvard Business Review, many companies are still deciding to keep production overseas. However, the data trends suggest that offshoring is quickly losing its price value. Certain political changes and new business incentives in the United States could help tip the scale even further.
  • According to a 2012 summer study by MIT, out of 108 American manufacturing firms, 14 percent had firm plans to return manufacturing to the United States, and one-third were “actively considering such a move.”
  • Labor wages in many of the traditional foreign manufacturing markets are soaring. Labor strikes are also frequent, resulting in an unpredictable and often volatile production site.
  • Development of new technologies, like 3D printing and robotic laborers, will lead to more domestic production. Even if these technologies don’t translate into immediate job opportunities for unskilled laborers, they will likely open up new opportunities and new positions.

The report is careful not to make wild predictions about the return and sudden growth of manufacturing jobs in the United States, but it is clear about the increasing data set against the old benefits of offshoring production. Our hope is that more business incentives and changes in the culture of education and manufacturing can help cultivate the growth of jobs that our economy and citizens need.

We look forward to continuing this important discussion in future blog posts.

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