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Manufacturing Renaissance in America?

Posted by: pjeanty

Tagged in: Untagged 

pjeanty

Manufacturing jobs migration which has been happening since the 1970’s to China and cheaper developing countries might witness a break soon per recent studies done by Boston Consulting Group.  The study expects the wage gap between China and USA to go down by 2015, due to rising wages in China. 

Companies are already exploring cheaper geographies to migrate, but some companies are finding that there are cheaper locations in the U.S. itself.  The BCG study validates other reports observations that some states in the US are cheaper than many locations.  The manufacturing jobs that come back may not all go to States. They might go to Latin America locations, especially Mexico, due to the cheaper labor rates. 

As they call it, nearshore in IT outsourcing, near-shore in manufacturing might bring jobs back to America as well.  Recent reports suggest that toy making, which is a staple industry for China, which makes 90% of U.S. toys, might also find some shift happening in the near future.  Some companies like Wham-O Inc  have actually made the shift back to the U.S.  Companies like caterpillar have announced increase in production in U.S.  The BCG study points that there are several highly skilled labor in low cost States in U.S. whose services can be used.

The wage difference, which was earlier 8% when compared to the U.S., is shrinking and is projected to reach 69% by 2015, making the process of outsourcing unnecessary.  Obama’s export target seems to be derived mostly from increased exports from America by making the dollar cheaper and other currencies stronger.  That would work since a weaker dollar will make U.S. manufacturing competitive and bring in more manufacturing jobs and hence strategically as well, financial moves are being made to make U.S exports more competitive. 

In addition, the shift in wealth that has happened due to outsourcing of IT and manufacturing to the emerging countries have increased standards of living and increased cost of living in the outsourced countries. This makes  their currency stronger as well.  

Could this be one card in the Obama Recovery Plan for 2012?