The U.S. unemployment rate has stagnated at 8 percent. Companies across the nation are eliminating jobs and entire departments. But one industry has actually seen a steep increase in the number of available jobs – the manufacturing industry. Boston Consulting Group estimates that more than five million manufacturing jobs will be added over the next ten years.
Manufacturing jobs are critical to a healthy American economy. They give people with less education a chance at good wages and economic freedom, creating a larger, stronger middle class. The job stability of many skilled professions, such as accountants and lawyers, is affected by the number of manufacturing jobs in America, especially in goods-producing companies. There are no skilled jobs at a company if the company cannot remain profitable. A company cannot remain profitable without a middle class to purchase its products. The importance of a strong middle class is a large part of the reason a Boston Consulting Group study about manufacturing jobs in America is getting so much buzz.
According to the study, as production costs rise in other developed countries, the U.S. continues to look like a more attractive place to manufacture. Labor costs in America are less than those in the majority of other industrialized nations. Boston Consulting Group estimates that in three years the U.S. will have a cost advantage of up to 25 percent over France, the U.K., Germany and Italy in many manufacturing-related tasks. The U.S. also has a cost advantage in purchasing natural gas – we pay only a third of the average world prices.
What about China? Once seen as a clear choice for a manufacturing location over the U.S., the cost of manufacturing there is expected to be only 7 percent cheaper than the U.S. by 2015. Hal Sirkin, a senior partner at Boston Consulting Group, said that the price advantage in China is negligible. The hassle of producing so far away from New York City creates longer supply chains and higher shipping costs. American workers are also 3.2 times more productive than Chinese workers.
With the statistics Sirkin mentions, it is clear that the minor cost advantage of producing in China is not enough to make up for the higher shipping costs and less skilled workers. What about other Asian countries, where it is even cheaper than China to produce? The U.S. simply cannot be the cheapest place to manufacture, right? When you take other factors into consideration, it is. Vietnam, Indonesia and the Philippines are relatively cheap countries to produce in but they have poor infrastructures and governments often tainted by corruption. Their workers are also not as productive as U.S. workers, according to Sirkin.
Companies are already taking advantage of America’s lower production costs. Rolls Royce produces airplane engine parts in Virginia, Siemens builds its gas turbines on U.S. soil and Toyota has plans to assemble its Camry and Sienna models in Kentucky and Indiana.
Gone for what many would say was too long, manufacturing is poised for a comeback in America. We can only guess at the impact of this return on the county’s high unemployment rate. If the argument about manufacturing jobs being the bedrock of the economy holds true, however, maybe a lower unemployment rate is closer than we think.
What do you think about companies bringing production back to U.S. soil?