For The Atlantic, Charles Fishman describes how “insourcing” is now bringing jobs back to America.
Many offshoring decisions were based on a single preoccupation—cheap labor. The labor was so cheap, in fact, that it covered a multitude of sins in other areas. The approach to bringing jobs back has been much more thoughtful. Jobs are coming back not for a single, simple reason, but for many intertwined reasons—which means they won’t slip away again when one element of the business, or the economy, changes.
As with any economic trend, the motivating factors here are complicated, and the article does a good job of laying them out. For one thing, higher oil prices are making the cost of shipping goods across oceans more expensive. For another, China’s economy is modernizing, which means higher wages for workers there, undermining the financial impetus for American companies outsourcing manufacturing.
But there seems to be two major factors driving this.
The first is America’s energy boom. While increases in oil production haven’t done a lot to bring fuel prices down (more on that here), the natural gas boom in America has certainly had a dramatic impact on electricity prices. Manufacturing uses a lot of power. Lower prices here, backed by surging natural gas reserves, means manufacturing in America is cheaper.
Second is organized labor’s weakening grip on private sector labor. A couple of years ago, for the first time in history, public sector union workers began to outnumber private sector unions. That was the result of a decades-long trend in declining union enrollment, which continues through today. Unlike public sector unions, private sector unions have to be more pragmatic. As we saw with the Hostess debacle, a union that gets too greedy will kill the business it is associated with, resulting in no jobs for any workers.
The private sector unions still standing are learning to be a bit more reasonable in their demands. That’s keeping American labor costs lower and bringing more jobs to the country.
These things could change, of course. The federal government could kill off America’s energy boom through taxation and regulation. Organized labor in the private sector could see a resurgence. But for now, the “outsourcing” trend that politicians have been griping about for decades seems to have reversed itself thanks not to any new tariff or government policy but through developments in the free market.