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Onshoring Gains Momentum

Over the past year or so, it’s become increasingly clear that something has changed in the world of outsourcing. Rising labor costs in China and Eastern Asia and the new abundance of energy resources in America are combining to push manufacturing projects back to the U.S. A new study from the Boston Consulting Group suggests that this onshoring is gaining momentum as U.S. manufacturing becomes more competitive than its Asian and European rivals. The FT reports:

The consultants estimate that because of the underlying shifts, the US will by 2015 have a cost advantage over manufactured goods exports of 5 to 25 per cent compared with countries such as Germany, Japan and the UK. In particular, the cost disadvantage the US suffers compared with China is starting to decrease.

While in 2010, the cost of turning out a dollar’s worth of goods in a Chinese factory was on average 12 per cent less than the equivalent cost in the US; by 2015 the cost gap will be reduced to 7 per cent, the consultants say.

And while many of these factories will be highly automated, Americans will see a modest jobs boost related to this growth—as many as five million in eight years. This won’t be enough to reconstruct the manufacturing employment of the 1950s, but it should do something to help a job market that continues to underperform.

There’s a lot less than meets the eye to stories of America’s decline; we can still shoot ourselves in the foot, but failing self-inflicted disasters, the 21st century is looking more and more favorable for American economic growth.

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