The idea the manufacturing can return to the US isn’t just a patriot’s pipe dream. There are many reasons why it makes sense-and it is due to the fact that it can make plenty of dollars. The fact is that the laws of economics are on the USA’s side, just like time, says the 50-year-old financial consulting firm Boston Consulting Group. The firm has analyzed the costs and benefits of manufacturing in the US, and the prospects look quite promising.
Among the key reasons why the US stands to have a manufacturing rebirth is the automation factor–as manufacturing become more and more sophisticated, more of the work is done by machines that are controlled by a skeleton crew of skilled technicians. As a result, the cost of hourly wages becomes a smaller and small cost component for the finished goods, which means nations with lower wages, like China, have less of an edge over American laborers. Furthermore, wages in China aren’t that cheap any more. As production workers become fewer, they become more skilled, and thus possess more wage leverage. Business Week recently reported similar findings.
China is now facing the woes of maturing capitalist economy. People have gotten used to job stability. They demand higher wages and possess leverage since they possess the skills that drive the economy. Their demand for consumer goods and energy has driven prices skyward-costs are rising while productivity stagnates-in China it is getting like the late 1970s in America, when growth ground to a halt and productivity lagged as prices rose. America has already been through all this, has bled the jobs and red ink and has since learned to be flexible, nimble and lean in order to bounce back, and bounce back it will-it’s not a pipe dream or a patriotic fantasy. It’s the result of the laws of economics in action.
As the Boston report points out, wages in China are rising steadily and significantly as that nation’s economy matures-15 to 20 percent per year in fact-to the point where the highest-paid Chinese production technicians now earn almost as much as their American counterparts. American wages have been almost flat, which means it makes more and more sense to bring some manufacturing home instead of outsourcing. Add the fact the dollar remains weak in comparison to the Yuan and many other foreign currencies, and the American advantage is further compounded.
The Boston report goes onto say that the US has retained its percentage share of the world’s total productivity, a healthy 19+ percent, even as the number of manufacturing jobs in the US has declined. America’s productivity rates remain the highest in the world, and it has held its global productivity percentage for over three decades even as industrial giants like China have emerged to change the world. As a result of all these factors, the US has enjoyed job growth in various manufacturing sectors, including such items as plastic coolers, high-end headphones and ATM machines. Ford has brought thousands of jobs back to the states for the same reason other forms will-because it will save them money.