According to surveys, large manufacturing companies are more likely to move production facilities to the United States than to China. The labor costs and the quality of production are factors for companies to "re-shore". Surveys found that 37% of large manufacturing companies are planning or actively considering moving their production facilities to the United States. Labor costs are expected to increase in China, and the costs of sourcing from China are greater than what appears on paper because of the proximity of customers and the cost of doing business. It is expected that the increasing competitiveness of the American job market will create over 3 million jobs by the end of the decade.
Link:
http://www.cnbc.com/id/47097720
This move might be costly to American companies. As we have seen in class, one of the major reasons that companies moved to China was because of cheap labor and accessibility to specific natural resources. However, if labor prices are going to increase in China, I am sure that American companies will have to study different Asian markets before moving to the USA. There are some Asian markets that are still feasible, such as the Indonesian and the Indian market. Furthermore, I believe that with the economic recession in the USA companies might also have the opportunity to pay their workers the minimum wage and in that way they will create more jobs within the country.
ReplyDeleteSounds like a game changer!
ReplyDeleteMany people have worried that manufacturing is a “race to the bottom”, where manufacturers and businesses in other production aspects will relocate their production locations away from their mother countries like the US or Europe to other locations where labor is inexpensive, like China and Vietnam. I personally find it comforting that American firms are “re-shoring” since this improves American employment numbers and economic growth in the country in general, but I also am speculative of how long “re-shoring” will last.
ReplyDeleteAlex Conlan
What we're seeing is what happens in any maturing market - prices go up. When only a few companies were manufacturing in China, labor was plentiful and cheap, but now with the market flooded with participants and the skills and expertise of Chinese workers improving, costs have risen dramatically and companies are looking for opportunities elsewhere. A recent Sunday NY Times article (see the bottom of my comment for the link) discussed Apple's manufacturing in China and how the US lost out on the opportunity. While Apple could still be profitable if they manufactured in the US, the goodwill earned from being a "Made in the USA" company probably would not outweigh lost profits. The next hub for manufacturing will also face the same problems that China faces now.
ReplyDeleteArticle link: http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all
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