While China's Competitiveness Erodes, U.S. Poised to Add Millions of Jobs by 2020

The U.S. economy is poised to create up to five million new manufacturing jobs by 2020 due to increasing demand for U.S. exports, according to new research from the Boston Consulting Group (BCG). Since 2006, U.S. exports have risen by 30 percent — far outpacing the growth in gross domestic product (GDP). BCG senior partner, Harold L. Sirkin, projects that the demand for U.S. exports will continue to grow, leading to an American Manufacturing renaissance between 2015 and 2020. This positive news contradicts prevailing attitudes about the declining competitiveness of the U.S. manufacturing sector, especially in comparison to China.

BCG also credits the growing trend of reshoring, the repatriation of U.S. manufacturing operations, as an important creator of U.S. manufacturing jobs over the coming years. A recent study conducted by Dr. David Simchi-Levi from the Massachusetts Institute of Technology (MIT) provides evidence to support the BCG projections. Dr. Simchi-Levi found 14 percent of all surveyed U.S. manufacturers definitely plan to reshore some of their manufacturing operations in the coming years, while almost 33 percent of companies with sales greater than $1 billion are planning to bring back production to the United States. These companies would join others that already have brought back at least 50,000 manufacturing jobs since 2010, according to estimates by the Reshoring Initiative's founder Harry Moser.

This burgeoning American manufacturing renaissance can be attributed to three key factors — comparatively low-costs of production, supply chain advantages and abundance of energy resources. BCG predicts that by 2015, the U.S. will have an export cost advantage of up to 25 percent over other advanced economies (e.g., Germany, Italy, France, the U.K. and Japan) in a range of industries, specifically advanced manufacturing industries. In a study from the Hackett Group, the authors contend that companies are reshoring their manufacturing operations, specifically advanced manufacturing industries, from China due to the stability and cost-effectiveness of U.S. global supply chains. The U.S. also presents a cost-effective, centralized location to manufacture and ship goods around the globe to consumers in developing and advanced economies that European and Asian competitors do not provide. Potential energy resources, including natural gas reserves, also provide a significant comparative advantage over European and Asian competitors, according to the BCG research.

While the U.S. is becoming the destination of choice for both domestic and foreign companies looking to relocate their manufacturing operations, China's competitiveness is rapidly eroding. The Hackett Group found China's cost advantage in manufacturing will evaporate by the end of 2013 when total costs of operations (e.g., transportation and total land costs) are taken into account. The BCG report also concludes that China has seen a decade-long slide from a 14 percent average manufacturing cost advantage to only 7 percent in 2015, excluding transportation and other supply chain related costs. Both studies find China's decline in competitiveness can be attributed to several factors including increased wages for Chinese workers and high global transportation costs.

To capitalize on these new trends, policymakers must create policies to make the U.S. more attractive to companies looking to relocate their manufacturing operations due to China's decline and address several vulnerabilities that exist in the U.S. supply chain, according to two recent reports. In his study, Dr. Simichi-Levi recommends the U.S. must lower its corporate tax rate to fuel reshoring and attract foreign firms. A report, co-authored by former Secretary of Homeland Security Tom Ridge, found U.S. reliance on foreign suppliers places the U.S. supply chain at risk in the wake of future natural or manmade catastrophic events. The report provides several recommendations to strengthen the supply chains, including the development of a national manufacturing plan, reinvestment in infrastructure and cultivation of a highly-skilled workforce.

Join Secretary Ridge, President and CEO of Ridge Global, as he share his insights on the importance of revitalizing U.S. manufacturing and other key issues related to economic development during our opening keynote at SSTI's 2012 Annual Conference in Atlanta. Secretary Ridge's speech will kick off two days of exciting ideas, stimulating discussions and knowledge building. Learn more about the conference at: http://www.ssticonference.org/.