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But unskilled labor positions will remain in short supply.
sparked by Henry Ford’s mass production innovations in the 1920s in Detroit.
“The factory of the past was based on cranking out zillions of identical products,” writes The Economist in a special report on the new trend published in April. “Now a product can be made on a computer and ‘printed’ on a 3D printer, which creates a solid object by building up successive layers of material. … the cost of producing much smaller batches of a wider variety, with each product tailored precisely to each customer’s whims, is falling.”
Manufacturers have discovered the value of bringing production closer to the point of sale, where their employees can engage more directly with customers and adapt quickly to changes in the market. And for all the changes in the global economy, the point of sale, by and large, will still tend to be in the world’s largest consumer economy.
For America, this could be the start of something good, according to the Boston Consulting Group. In 2011, BCG reported that, due to a number of changing economic realities — including rising salaries and economic expectations among Chinese workers, new labor, environmental and safety regulations abroad, the higher cost of energy required to ship products halfway around the world, and the US market and the uncertainties of political risk in these places — the cost benefits of producing in Asia no longer automatically outweigh the risks.
Indeed, the BCG report predicts a “renaissance for US manufacturing” citing the fact that labor costs in the United States and China are expected to converge around 2015.
“Executives who are planning a new factory in China to make exports for sale in the US should take a hard look at the total costs,” says BCG’s Harold L. Sirkin, an author of the report. “They’re increasingly likely to get a good wage deal and substantial incentives in the US so the cost advantage of China might not be large enough to bother and that’s before taking into account the added expense, time, and complexity of logistics.”
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Skeptics continue to question whether this is sustainable. Not in the political realm, of course; it is anathema for any politician to suggest that America should content itself to life as a “post-industrial society,” in part because so few can explain how to employ 300 million people in such a place.
“Even if we didn’t have to compete with lower-wage workers overseas, we’d still have fewer factory jobs because the old assembly line has been replaced by numerically-controlled machine tools and robotics. Manufacturing is going high-tech,” writes Robert Reich, a University of California at Berkeley professor who served as Bill Clinton’s labor secretary. “Bringing back American manufacturing isn’t the real challenge, anyway. It’s creating good jobs for the majority of Americans who lack four-year college degrees.”
BCG, which launched a cottage industry with its 2011 report on manufacturing, believes this line of argument misses the changes underway in the global economy. On April 20 its economists released a survey of the largest American manufacturing firms. The results: one third of all US manufacturing executives of companies with sales above $1 billion per year now say they are planning or considering “reshoring”; in effect, bringing home manufacturing plants that were sent to China and other low labor cost countries during the 1990s and first decade of this century.
The top factors for bringing these jobs home cited by these executives surveyed by BCG: Higher labor costs in Asia (57 percent), ease of doing business (29 percent), and proximity to customers (28 percent).
For the American worker, this will be rare good news. But the jobs that are returning will look nothing like those that left. Rote assembly lines, low value-added manufacturing like textiles, furniture and heavy smelting operations like the steel industry may never again be profitable in the way they were after World War II, when the US economy was the last bastion of capitalism not destroyed by war.
But history shows that workers adapt to change when the incentives are present. Displaced hunters became farmers; displaced farmers became artisans; displaced artisans learned the skills of the factory; and displaced factory workers can learn the techniques of the 21st century.
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