Manufacturing jobs moving back to US

 With cost arbitrage in wages no longer significant, American companies are increasingly reshoring manufacturing jobs back home from countries like China, a trend about which definitive data is however not available, according to Wharton School professor Morris A Cohen.

“In the last 10 to 12 years, about 5 million jobs in manufacturing moved away from the US, mainly to China, as companies wanted to take advantage of low wages and thereby benefit from low-cost manufacturing. But with wage costs in China rising almost 24 per cent in the past few years and barely 2 to 3 per cent in the US, there is no significant competitive advantage,” he said.

“Once the differential is negligible, it makes more sense for US companies to reshore jobs,” he added.

Cohen, who is professor of manufacturing and logistics at Wharton School, spoke during his presentation on “Global Supply Chain Strategy in India” here on Saturday organised by and at the Indian Institute of Management (IIM), Bangalore.

He however, said that the number of jobs so shifted or estimated to be shifted in the next few years is still unclear. “Reshoring is real, but the extent is debatable.” Consulting firm Boston Consulting Group had estimated such reshoring of jobs at about two to three million, Cohen said. He cited Philips shifting manufacturing of electric shavers from China to Netherlands as an example.

Apart from diminishing cost arbitrage and domestic unemployment in the US, he said that firms also have another reason for it.

“Once a company stop manufacturing a product, it loses the ability to innovate at a later stage. So the risk of outsourcing (manufacturing jobs) is high.”

Cohen said that a survey will soon commence in India on supply chain trends, which will be conducted jointly by Wharton School, University of Pennsylvania and the IIM, Bangalore.