China America – Manufacturing jobs move back to the United States
Many businesses, including electronics companies Motorola, Lenovo, and Apple, have brought manufacturing jobs back to the United States despite the costs involved, showing that they value the benefits of the “Made in America” brand.
According to the Bureau of Labor Statistics (BLS), the average compensation costs, including wages and benefits, for manufacturing jobs in the United States totaled $34.74 per hour in 2010. In comparison, the BLS estimated that the average compensation costs for manufacturing jobs in China totaled roughly $1.36 per hour in 2008. This is a marked difference, even when accounting for wage increases for Chinese workers between 2008 and 2010. Although lower wage costs are a huge incentive for American companies to outsource manufacturing, China also offers tax breaks, low-cost land rental, and reduced utility costs.
Manufacturing jobs in the apparel, appliance, and electronics industries have fled the U.S. in the last few decades; however, some companies in these outsourced-prone industries are now moving manufacturing jobs back to the states. Manufacturing in China is no longer as appealing as it used to be since compensation costs are increasing every year. By 2015, Chinese wages will average $6.15 per hour. Although this number is still significantly below the U.S. minimum wage, factors such as higher productivity rates of American workers are fueling many companies’ “reshoring” movement.
Speed of delivery, customization, and the “Made in America” marketing message are some of the advantages to manufacturing electronic products in the U.S.
Earlier this year, Tim Cook, Chief Executive Officer of Apple, confirmed that his company will be spending $100 million to move manufacturing of the new Mac Pro line of desktops to the U.S. Cook stated that “[t]he product will be assembled in Texas, include components made in Illinois and Florida, and rely on equipment produced in Kentucky and Michigan.” Like other electronics companies, many of Apple’s products were assembled in the U.S. until the late 1990s. At that time, companies began taking advantage of lower labor costs overseas.
Apple is not the only electronics company rerouting manufacturing to the U.S. Lenovo, a Chinese-based company with U.S. headquarters in Raleigh, began manufacturing Think-branded desktops and laptops at its existing distribution center in Whitsett, North Carolina, in January of this year. The manufacturing addition to the facility cost Lenovo $2 million and currently employs 115 workers. According to a report by David Muir at ABC News, the number of employees could double by the end of the year “if all goes well.” Tablets are the next product scheduled to be manufactured at the facility.
Lenovo’s North American President Jay Parker spoke about the logistical costs of manufacturing overseas. He commented that partial savings could occur by manufacturing in the U.S. However, he clarified “that doesn’t mean it is less expensive or even comparable in expenses to make products in the U.S., but the company does see other advantages, including speed of delivery, customization, and then the ‘Made in America’ marketing message.”
Electronics manufacturing in the U.S. has not stopped at computers and tablets. Motorola will be producing the Moto X, the first smartphone to be “assembled” in the U.S. Although components of the phone will be made overseas, the phone is being assembled at a 500,000-square-foot plant in Fort Worth, Texas, which will employ two thousand people. Tim Worstall, contributor for Forbes, provides estimates that the additional cost of manufacturing the phone in the U.S. is $4.00 per handset, and labor costs are an additional $8.00. Thus, the total, additional amount of money flowing into the U.S. economy as a result of the decision to assemble the Moto X stateside equals approximately $12.00 per handset.
Worstall minimizes this figure by pointing to the nominal effects that Moto X sales will have on U.S. gross domestic product (GDP). He writes that “we should be paying less attention to th[e] idea that bringing manufacturing back to the U.S. is going to change very much. It’s most certainly not going to provide mass employment in well paid blue collar jobs. Simply because assembly doesn’t add much value.” However, Worstall disregards the effect of manufacturing as a whole on GDP and fails to consider the potential economic value in manufacturing jobs.
With outsourced manufacturing jobs returning, cars and appliances are just some of the products that will be manufactured in the U.S.
Foreign automakers, including BMW, Kia, Mercedes, and Volkswagen, have opened plants in the U.S. In the past twelve months, auto manufacturers have added 34,000 jobs. In addition, many appliance companies are shifting manufacturing jobs to the U.S. Whirlpool is in the midst of making a five-year, $1 billion investment in U.S. plants, facilities, and equipment for the production of front-loading washers, which were previously manufactured in Germany. General Electric opened two factories in Kentucky, which will be producing hot-water heaters and refrigerators. Taken together, these manufacturing shifts could have a tremendous impact on the U.S. economy.
While these shifts in manufacturing are significant, it is also important to recognize that the U.S. still makes about three-quarters of the manufactured goods it consumes. Credit is due to those companies who have never shifted manufacturing overseas in their existence: The Tervis Company, founded in 1946, and Lenox, founded in 1889, are just two examples of such companies.
“We understand why businesses offshore their production. We also fundamentally believe that making things is critically important to the long-term health of this country.”
A new documentary, American Made Movie, illustrates the successes of companies that have prospered without adopting the practices of their competitors. In the movie trailer, we are told that “Since the year 2000, we’ve lost about 5.5 million manufacturing jobs. That loss in manufacturing jobs is kind of the backbone that has caused this incredible unemployment.” One film contributor also stated “We understand why businesses offshore their production. We also fundamentally believe that making things is critically important to the long-term health of this country.”
Although the American Made Movie filmmakers are raising awareness of American-made products, outsourcing, and unemployment, one organization is leading a larger “Made in America Movement.” The mission of MAM, whose name is derived from the movement itself, is “[t[o play a part in the restoration of the U.S. economy by connecting American manufacturing to consumers; to educate consumers on the importance of buying American made products; and to partner with American manufacturers and businesses to collaborate on maximizing their use and distribution of Made in USA products.”
Taking a closer look at unemployment across the country, we must begin to wonder whether a loss in manufacturing jobs has taken some part in crippling local economies. Unemployment rates by state range from 3.0 percent to 9.5 percent. In North Carolina, where manufacturing jobs are being replaced by lower-paying service sector jobs, the unemployment rate is the third highest in the nation–tied with Rhode Island at 8.9 percent. Many states offer tax credits or exemptions from sales taxes to businesses that invest in manufacturing property and equipment. In conjunction with these incentives, some states have reduced businesses’ tax liabilities, requiring that only real property taxes, not personal property taxes, be paid.
Tax credits, exemptions, and other incentives have driven manufacturing jobs back to the United States. However, the fate of American manufacturing could lie in the powerful hands of consumers. One important way to support American businesses, and ensure that reestablished manufacturing jobs remain here, is by buying American-made products.