The U.S. manufacturing renaissance continues to be debated among pundits, politicians and industry analysts. Some of these experts believe American manufacturers are returning to the United States due to a shrinking wage gap in China, more effective manufacturing processes and better employees.
The manufacturing renaissance made interesting news in January 2015 when Chinese computer maker Lenovo announced it opened an assembly line at a plant in North Carolina. Reasons cited include the ability to get products in the hands of American consumers faster. Lenovo plans to expand its presence in the U.S. market, and it wants to ship tablets, workstations and computer servers to customers at a fast pace.
Some American manufacturers want to reshore some of their operations due to the shrinking wage gap between Chinese workers and American employees. Americans made $17 more per hour than their Chinese counterparts in 2006. By 2015, that number should shrink to $7 per hour. The manufacturing renaissance may move forward once that monetary gap shrinks further, especially since costs are lower in the United States with respect to shipping and inventory.
Another reason manufacturers may find the United States more attractive is product quality. High-tech innovations, engineers with advanced degrees and better technology help keep American companies competitive versus Chinese firms. When better products make it to market faster, manufacturers earn profits more quickly.
Statistics seem to point to a small percentage of firms reshoring their operations. Between January 2010 and May 2015, American manufacturers added 520,000 new jobs, and approximately 50,000 of those came from reshoring activities. Yet, 6 million manufacturing jobs vanished from 2000 to 2009. If the manufacturing renaissance keeps gaining momentum, it may look different than the manufacturing boom of the 1980s due to automation, advanced technology, collaboration and innovation.
A survey conducted in February 2012 noted that 37 percent of U.S. manufacturers with sales of more than $1 billion considered moving more operations to the United States. Aside from wages in China, other factors include labor disputes, stricter labor laws and strikes occurring in China. Plus, American workers have become more productive, and wages for unionized workers actually lowered in some industries.
Other facets that lower manufacturing costs include shipping, robotics, cheap natural gas and oil, and non-union states in the South. Manufacturing costs in the United States are expected to be less than Japan and Europe in 2015. European companies such as Airbus, Ikea and Volvo agreed to open plants in the United States in order to expand their customer bases.
Even with these high-profile companies, many instances of the manufacturing renaissance remain anecdotal rather than statistically relevant. Some manufacturers have moved further inland in China where wages remain cheaper. Other Asian countries, such as Bangladesh and Cambodia, may have more attractive labor costs for large firms. Even if shale oil and natural gas are cheaper, fluctuations in the market support the energy industry more than manufacturing since energy costs are one small factor in a company's overall expenses.
Despite the small amount of evidence that points to a manufacturing renaissance in America, experts believe even more companies may return to American shores in the next three to 10 years. The reasons include a better overall climate for innovation, technological advances and wages throughout the industry.
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