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The Caldron

Photo courtesy of BlockThirtySeven.
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As American as Apple… Computers?

We’re all used to the idea of having every product labeled, “Made in China.”  Manufacturing lines for toys, cars, and everything in between have been outsourced overseas due to the lower costs.  Recent activity, however, has indicated that some notable American companies are choosing to bring their assembly processes a few thousand miles closer to home.

Reshoring, the movement of manufacturing away from where they were outsourced back to the country of origin of the parent company, is a trend that has been growing very slowly in the past decade.  In the early 1990s, such an idea was nearly inconceivable from a financial viewpoint.  During this time, major tech companies such as Hewlett-Packard and Dell viewed the cheap labor and abundance of raw materials that were available in China as a means of cutting costs and gaining an edge in the growing tech market.

In recent times, however, many companies are starting to reweigh the benefits of outsourcing with its drawbacks.  Quality control issues, distance of communication and risks of intellectual property theft are but a few of the many negative aspects that companies now have to consider.  In order to remain competitive, they need to ensure that their products are protected by law and also well-built in a timely manner.

Most importantly, companies need to ensure that they can make money.  Wages in China have been on the rise, from the 38 cents an hour that once was appealing to foreign businesses to levels much more comparable to those in the United States.  In addition, rising energy and transportation costs have discouraged importation.

Recognizing these crucial facts, big names like General Electric, Google, and Ford have announced plans to look into bringing production back home.  In early December, Timothy Cook, Apple’s chief executive, said that Apple would be investing an additional $100 million into assembly work in America.  Even companies abroad, like China-based Lenovo and Europe-based Airbus, have hundreds of workers in the United States employed to build their goods.

“Companies are in the business to make money,” noted Joseph Licavoli, an economics teacher here at JCHS. “If reshoring allows them to take advantage of an economic workforce that is cost efficient, then companies will keep their jobs here.”

Could this shift in interest away from the Asian market be a possible game changer for the United States as a whole?

“[Reshoring] is important if it’s an indicator that we’re producing and educating a workforce capable of garnering real living wage jobs,” commented Licavoli.  However, he also noted that, “… the economy is enormous, much too large for 100 jobs here and there to make an impact.”

Presently, the number of reshored jobs numbers is in the thousands and a percentage of the invested money has gone into automated processes that won’t make a direct impact on the economy. But with unemployment still above 7.5%, reshoring shows potential in America’s economic recovery.  Gene Sperling, director of the president’s National Economic Council, said that the White House planned to further the reshoring’s potential.

“I think what you want is a mutually reinforcing cycle, where basic economic trends that make the U.S. more competitive for manufacturing and for creating supply chains is encouraged and supported by policies that recognize those location decisions have broader spillover impacts that benefit the economy beyond specific companies.”

This growing trend is definitely indicative of changes from the status quo of manufacturing, but we are yet to reach the point when we can make jokes about everything being made in America.

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