Thursday, August 16, 2012

Creating US Manufacturing Jobs

Call it 'onshoring' or 'reshoring' more manufacturing is returning to the US. Why? If you listen to political analysis, you'd think it's because taxes have decreased and regulations have been rescinded. At least, you think that because most pundits tell you that an increase in taxes and regulations cause jobs to move to other countries. It's not those things at all. It's simply costs.

Wages are rising in other countries. Logistics costs are increasing (i.e. the cost of moving goods across the water are going up). The investment in inventory is increasing. Corruption in the BRIC countries is high and that costs something. Lower skilled jobs are being replaced by higher skilled jobs and stable education systems are important. A solid infrastructure--which both Obama and Romney admit was not built by businesses--is critical; without that, transportation and warehousing time and costs increase just getting goods to points where they can cross borders. More handling increases the probability for shrinkage--damage, theft, containers falling off ships, incorrect product being moved, etc. Because of the increased length in the supply chain, obsolescence grows as a potential loss. A healthy workforce is more productive; therefore a country with overall good health will have lower costs. Oh, and then there's tariffs when you bring the goods into this country.

Don't believe me that it's not taxes and regulations losing jobs? Read a recent Time magazine or look at others' studies. If jobs are coming back into the US for these other costs, then they didn't disappear because of taxes and regs. Taxes are such a minuscule contributor to the overall product cost. Now, the head of Honeywell will say that jobs will stay overseas, as reported in a local NPR report. Why? Because they need to produce product close to those geographic markets. Hmm, doesn't that sound like it's based on costs, not taxes.

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