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Reshoring optimism, but not much else

Robots

You’ve probably heard the good news. After a decade of being constantly bombarded with news of off-shoring, images of deserted factories, and heart-wrenching tales of laid-off American workers unable to find new employment now that their job is in China, jobs are streaming back into the country, factories are reopening, and we’re back to whistling while we work. We’ve even got a new word for the phenomenon- reshoring.

Just don’t look at actual data. Because funny enough, the numbers illustrate that reshoring is a myth.

True, off-shoring has slowed and has maybe even stabilized. But this respite does not mean that manufacturing jobs are reappearing. Yes, there are isolated instances which your local paper can emphatically cite. However, there is no evidence that America’s manufacturing woes have magically worked themselves out, or that a significant number of jobs that left for China and Mexico are being shipped back.

The truth is that even since the recession, more manufacturing firms have been lost than created in the United States. Manufacturing establishments (the number of factories or manufacturing sites), have followed the same trend. In 2011, the United States was home to 10 percent fewer manufacturing firms and manufacturing establishments than in 2008. In fact, in 2011 the United States had the fewest manufacturing firms and manufacturing establishments since the Census Bureau began collecting Business Dynamics data in 1977 (when, it should be mentioned, the U.S. labor force was 35 percent smaller than it is today).

Admittedly, this data is only current through 2011, but manufacturing employment data tells a similar story. While the economy has added some jobs since its nadir in 2009, labor statistics show that employment growth since 2010 has matched, not outpaced, growth of the labor force. Yes, manufacturing jobs are up by 700,000 since 2010, but there are still over 1 million fewer manufacturing jobs than there were in 2008. Predominantly, recovered jobs result from factories returning to full production capacity as aggregate demand recovers, not from new manufacturing projects flocking to our shores.

Even articles brashly proclaiming the return of the manufacturing sector sheepishly admit that the number of firms they have actually seen reshore is under 100, many of which are small or mid-sized, or that job fluctuations due to offshoring and reshoring is about neutral. None of the articles back reshoring claims with real employment data, nor have more recently updated macroeconomic indicators pointed to a major reversal in the United States’ manufacturing fortunes.

Clearly, such articles represent cherry-picked case studies, not a national trend. Isolated examples are widely repeated because of public desire for good economic news as well as firms’ desire to improve public image by loudly publicizing their relocation.

With no serious changes or improvements to support for our manufacturing sector, the respite in rapid offshoring derives from the temporarily depressed value of the dollar and U.S. wages following the recession. Additionally, offshoring is slowing because most of the factories which could leave already have.

Manufacturing is not dead in this country, but neither is it experiencing a sudden renaissance. The sad reality is that the vast majority of departed jobs are not coming back. To recoup lost manufacturing strength, America needs a strong manufacturing strategy to boost research and development, encourage innovation, and ensure the United States remains a leader in advanced, emerging industries. We also need a stronger education system to ensure that the United States has the requisite labor force. Currently, the STEM shortage is an active barrier to U.S. manufacturing- Apple can’t relocate iPhone production to the U.S. because we simply don’t have the small army of 30,000 available engineers needed to man the factories. We need a smarter corporate tax structure to keep American production competitive with other nations. And we need research into robotics, additive manufacturing, and other cutting edge technologies that increase the productivity of workers and could make manufacturing goods in the United States feasible once more.

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About the author

Adams Nager is an economic policy analyst at ITIF. He researches and writes on innovation economics, manufacturing policy, and the importance of STEM education and high-skilled immigration. Nager holds an M.A. in political economy and public policy and a B.A. in economics, both from Washington University in St. Louis.
  • Sandy Montalbano

    We agree that America needs a strong manufacturing strategy.

    The Reshoring Initiative has current data on the trend. Only the Reshoring Initiative tracks reshoring in detail including: companies, jobs, investments, reasons, countries, states, etc. We document what’s actually happening in the trend. Case stuides, over 1500 reshoring articles, our Total Cost Estimator and much more can be found at http://www.reshorenow.org

    Our current data on reshoring U.S. manufacturing may be helpful:

    Since 2003, new offshoring is DOWN by 70% to 80% and new reshoring is UP by 1500%.

    The most important accomplishment has been the net-loss of 100,000+ manufacturing jobs each year has ended.

    New reshoring is now balancing new offshoring at about 40,000 manufacturing jobs/year, resulting in the first neutral year of job loss/gain in the last 20.

    Reshoring yielded:

    – About 120,000+ manufacturing jobs

    – 20% of manufacturing job growth since the Jan.
    2010 low

    – 240,000 total jobs including the manufacturing
    multiplier effect

    Changes in the global manufacturing market, technology and the benefits of locating manufacturing closer to customers are good economic reasons for foreign investment in the U.S. and reshoring manufacturing back to America because they can manufacture competitively.

    Companies are finding that having manufacturing near customers gives them better flexibility to respond to customers’ changing needs, eliminates higher shipping expense, minimize supply chain disruptions and eliminates the larger production runs and inventories associated with long distance offshoring.

    Many companies are investing and reshoring because it makes good economic sense to do so.

    In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the not-for-profit Reshoring Initiative’s free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/TCO_Estimator.cfm

    When companies see that the total cost differential is very low, they can redirect their efforts internally to improve product and production design to make up any remaining cost difference.

    Our economic development program, workforce development program etc. can be found here. http://reshorenow.blogspot.com/2014/08/the-reshoring-initiatives-economic.html