Tuesday, February 12, 2013

You've Heard of "Offshoring" Jobs

But have you heard of "onshoring" or "reshoring":  bringing manufacturing jobs back to the US?  I first read reports about this a few years ago. When companies first started moving tech jobs over to India and China, there was a much bigger gap in pay between the US and those countries.  As supply and demand has worked, there simply are not enough people in the world who can do those jobs, pay increases over there have massively outstripped raises here in the states and the economics is becoming less attractive for many reasons.

Design News has an article on the subject. 
China’s low labor costs once compelled companies to outsource production abroad. Today, wages are five times higher than they were 12 years ago, and are estimated to continue rising at 18 percent a year...
The Atlantic Monthly covers the subject, too.
The heart of their argument is this: Through most of post–World War II history, the forces of globalization have made it harder and harder to keep manufacturing jobs in the United States. But the latest wave of technological innovation, communications systems, and production tools may now make it easier—especially to bring new products to market faster than the competition by designing, refining, and making them in the United States. At just the same time, social and economic changes in China are making the outsourcing business ever costlier and trickier for all but the most experienced firms.  (emphasis added - SiG)
Strangely, it was just over a year ago that I wrote on this same topic, linking to an article in ... the Atlantic Monthly. They said in that piece:
We do still make things here, even though many people don’t believe me when I tell them that. Depending on which stats you believe, the United States is either the No. 1 or No. 2 manufacturer in the world (China may have surpassed us in the past year or two). Whatever the country’s current rank, its manufacturing output continues to grow strongly; in the past decade alone, output from American factories, adjusted for inflation, has risen by a third.
Finally, as I said in last January's piece, I've worked in electronics manufacturing since 1976, virtually my entire adult life; first as an electronics technician, and eventually as an engineer.  If there's one constant, it's the refinement of processes to run more automatically and require fewer but higher-level people.  I suppose the other constant since '76 has been people telling me we don't manufacture anything in America anymore.

There's a big political pie here, and His Royal Oneness is droning on in the background about manufacturing now.  I would bet his mental image of manufacturing is unionized workers of all kinds - the better for that conveyor belt of money that unions and government exchange.  Profitability for that kind of job is not very likely at all.   
(Atlantic author James Fallows at an electronics manufacturer in China). 


  1. +1. Spent the last 16 years before retirement designing and implementing business automation systems. It's way, way under the radar, but the productivity improvements are huge. Linking data systems to production systems for real-time data collection and production system management with those data offers huge productivity gains, sometimes multiple orders of magnitude.

    What gets publicized is "X number of jobs lost in industry Y" but the "1 employee now does what used to require 8 and does it faster at a higher quality level" - which translates to a better product or service, at a lower cost - either never gets out or is treated negatively.

    We're on the cusp of the next step - 2nd gen 3D printing and true remote automated CNC production, a culmination of DARPA's drive 25 years ago to "ship bits not atoms" (Nicholas Negroponte's phrase) that the private sector has fully embraced. I think over the next decade we'll see a LOT of mfg jobs, and related support activities, coming back to the US because the US really does relentlessly pursue being better, faster and cheaper. It's in our DNA.

  2. I've said it for years. Manufacturing jobs shifted overseas eventually will find their way back. As you state above,less people are needed for such jobs,so i'm not so sure it will truly benefit those that need\want to work.
    Meanwhile our infrastructure continues to decay,but nobody wants to drive a truck,learn to fix it,or operate the vast amounts of machinery needed to complete those jobs,which pay very good salaries\wages.I rarely hear anyone talking about those areas of jobs anymore as career.

    1. I have preached at my sons that a trade is better than IT. My job as diesel mechanicis secure, because you can't outsource it, and right now it still is useful. Office work is too skittish, and seems like too volitale of a carreer field to enter, whereas bieng a mechanic is fairly secure, and while not real high paying, still earns good wages.

  3. A range of low to mid-level tech support and software quality jobs have followed the same trajectory. I work for a company that's been trying, with increasing success, to bottle the 'onshoring' lightning since 06 or 07. We have some major competitors on the other side of the planet, but I think now we're also competing with other small and medium sized companies who have also noticed the demand for local support.

  4. I have a friend in Shanghai that works for the same large computer company I do and we discussed salary ranges recently in great depth. They make approx 80% of what we make here in the US at the same band level. Wage increases and a weak dollar are closing the gap.

  5. To Anon and HalfElf - first, there are jobs that won't go away - wrenches don't spin themselves to fix trucks.

    The next levels, though, won't need as many trucks. When we get to 3rd gen 3D printers and robotic handlers to load raw stock into fully automated CNC mills, trucks will be hauling raw materials, and the guy who needs the finished product will have an office 50 feet away, not 50 miles. There will come a point where the cost of the equipment (expensive, to be sure) outweighs the time delay in handling and delivery. When I was an engineer in semiconductor mfg we had a production line that cost $17.33 per second to run. Think that one through - 20 minutes of production-stop downtime, much less an entire shift, was more than catastrophic. Rarely as severe as that, business downtime, regardless of what kind of business, still has a cost. To paraphrase Nathan Forrest, productivity has a value all its own.

    I built an automated document system for a government agency that allowed them to go from 28 people performing a function to 4: one IT tech to babysit the system part-time, one clerk to feed the scanners, and two to manage the exceptions the software couldn't manage. You have no idea how much money local cardiologists made off that system. The concept that they now had 24 people who could be devoted to other tasks which would benefit from application of human intelligence, tasks for which software would be either prohibitively expensive or completely rejected by potential users, was lost on them (if you have a complex payment or legal problem - a problem that's totally analog - is it better handled by a human or a computer? Yep, thought so. "Expert clerks, not computers.") All they saw was 24 people who would lose their jobs. Changing the work environment to best use the assets available never occurred to them, mostly because they had "always done it that way." FYI, they had 32 open clerical hire tickets that were embargoed because of funds shortage. Go figure.

    Benjamin Franklin said over 200 years ago in Poor Richard's Almanac that there is nothing constant except change.

    Welcome to planet Earth.

  6. These are all excellent comments. On jobs that can't be outsourced but just aren't glamorous enough, how about Workin' in a Coal Mine? Or being a farmer. Did you know that almost nobody is going into farming these days and the average age of farmers is going up at virtually one year per year? Yeah it's hard work, and long hours. If nobody is going to be doing it, the pay for people who know what they're doing will be good.

    If there's one thing you can count on, it's that change doesn't stay linear. Jobs don't just go overseas. If your front porch is 40 degrees at 7 AM and 70 at noon, it's not going to be 100 at 5 PM. In both cases, change ebbs and flows.