It's no secret that U.S. jobs have taken a hit over the past 20 to 30 years, a situation often blamed on offshoring -- the practice whereby American manufacturers send formerly domestic-based jobs overseas to save on labor costs.
Lately, there has been a push to bring back at least some of those manufacturing jobs, with megaretailer Walmart at the forefront of the "Made in America" campaign. What effect, if any, is this rallying cry having on the economy -- and unemployment?
Capital flight changed the employment landscape
U.S. Manufacturing peaked in 1979, according to the Bureau of Labor Statistics, when there were more than 19.5 million people working in that sector. Thirty years later, that number had shrunk to approximately 11.8 million, after manufacturing suffered another big drubbing in the recession of 2007 to 2009. During the 2000s, it is estimated that the U.S. lost at least 33% of its manufacturing jobs, with 75% of the job losses concentrated in the durable goods area.
Over the past few years, there has been a renaissance of sorts, with a strengthening "Made in America" movement, featuring pledges by companies such as Apple, Google, and General Electric to "reshore" previously outsourced jobs. There is even a group called the Reshoring Initiative, which endeavors to aid companies in their mission to bring U.S. jobs back home.
How's it been working?
Against the 6 million manufacturing jobs lost during the years 2001 and 2009, the reshoring movement hasn't made much of a dent: just 50,000 outsourced jobs have migrated back since 2010, according to the Reshoring Initiative. Despite the push, hauling back a sizable number of those jobs just isn't in the cards.
Why not? The answer lies in change wrought over several decades, whereby automation and increased productivity have forever reduced the number of factory jobs required for the same level of output. A recent article in The New York Times gives a sobering example: A yarn factory now produces with 140 workers the same amount of product that would have required over 2,000 workers in 1980.
Another issue is the simple fact that workers have not be able to keep up with the type of work required for these jobs, since so few stayed put over the last 30 years. This means that factory jobs don't have a ready pool of experienced employees from which to staff their plants -- keeping these factories from gearing up quickly.
The real reason for reshoring: costs
Despite the pitfalls, the return of some manufacturing jobs is good news. And even though 64% of respondents in a Gallup poll earlier this year said they would be willing to pay more for products made in the U.S., patriotism is not the main reason companies are beginning to bring back the jobs. The real reason, of course, is cost.
Labor costs were the primary reason for offshoring, but rising Chinese wages are making the U.S. look attractive again. While wages here in the U.S. are still higher than in Asia, rising travel and shipping costs in China, in addition to escalating energy prices, factor in, too. Add in the convenience of being closer to your primary market -- and the higher quality control available at home -- and moving jobs back makes economic sense.
Although the unemployment rate dropped to 7% recently, the number of jobs in manufacturing hasn't changed substantially since February of this year, according to BLS. Still, some analysts predict that onshoring will continue, with 30% of currently imported goods being made domestically by the year 2020. For a job market just starting to heal from a bruising recession, that's definitely something to look forward to.
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