Good News and Bad News About US Manufacturing

Manufacturing jobs are coming back to the US - because foreign regulators are even worse than ours.

The good news is that manufacturing jobs are on the increase in the US.  Unfortunately, creating manufacturing jobs requires a lot more capital investment than service sector jobs which require greater levels of education.  Area Development reports:

Industrial Manufacturer to Invest $1M in Spokane Manufacturing Facility, Backshoring 20 Jobs

We've all heard of "offshoring," where companies transfer work, and jobs, offshore to other countries such as China.  This article speaks of "backshoring," where jobs which were formerly done overseas return to the United States - something we can all applaud.

Moving these jobs back to the US costs a great deal:

The total capital investment by the company is estimated to be over $1,000,000 in equipment and renovations, plus ongoing lease and utility costs. Annual tax revenue to the state of Washington for this new project will be over $450,000.

Each of the 20 jobs required a capital investment of $50,000.  Manufacturing jobs permit high productivity with somewhat less educated workers.  This makes it possible to achieve economic growth without a massive long-term investment in effective education.

Why Backshore?

There are many reasons why moving back to the US might be a good business strategy.  As transportation costs rise with fuel costs, it becomes less profitable to move work offshore.  The Japanese tsunami pointed out that a far-flung logistics chain is subject to more interruptions than when everything is made in a small area.  American car plants had to shut down when they could no longer get critical parts from Japan, for example.

Foreign rules and regulations are another reason to move back.  Indian rules and corrupt bureaucrats are so burdensome that most of Tata Motors's growth has taken place outside India.  Those jobs wouldn't count as backshoring since the jobs were created in America and England in the first place, but they represent growth all the same.

Rising wages overseas are another reason to move back.  The Economist reports:

"Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America," says Mr Sirkin. That calculation assumes that wage growth will continue at around 17% a year in China but remain relatively slow in America, and that productivity growth will continue on current trends in both countries. It also assumes a modest appreciation of the yuan against the dollar.

Given that it can take several years to build a factory and put it in operation, 2015 is not all that far off.  Gary Pisano of Harvard Business School argues that this trend may persuade companies to keep jobs in the US that would otherwise move:

The announcement on May 10th by General Motors (GM) that it will invest $2 billion to add up to 4,000 jobs at 17 American plants supports Mr Pisano’s point. GM is probably not creating many new jobs but keeping in America jobs that it might otherwise have exported.

Spending $2 billion to create 4,000 jobs means that creating each job costs $500,000, or ten times as much as the Washington facility cited above.

We Need Manufacturing

It's particularly important that America stay friendly to manufacturing.  Many service sector workers such as lawyers, teachers, software developers, and many others don't need all that much capital to work, but doing their jobs requires a great deal of training and experience.  Decades of effort have shown that changing the American education system to train more people to be high-paid service workers simply isn't going to happen.  If we're to create jobs, we'll have to rely on manufacturing which substituted mechanical capital for educational capital.

This isn't easy.  Few people want factories built anywhere near their homes.  In addition, the regulatory burdens are crushing - it can cost a small manufacturer $10,000 per year to comply with all the regulations.  Given the huge sums that are needed to create manufacturing jobs and the years of operation required for the facility to pay its costs and return a profit, investors have to have confidence that the rules will stay stable before they'll invest.

The Bad News

The bad news is that regulations are growing in spite of Mr. Obama's promise to reduce "unnecessary regulations" - it took a presidential review to persuade the EPA that spilt milk didn't need to be handled like an oil slick.  In "America's Mad License Raj," the Economist discusses the terrible threat to civilization posed by unlicensed interior designers:

IN 1941 Franklin Roosevelt added two new items to America’s ancestral freedoms of speech and worship: freedom from fear and freedom from want. Today’s politicians offer a far more generous menu: freedom from unlicensed hair-cutters, freedom from cowboy flower-arrangers and, most important of all, freedom from rogue interior designers. What is the point of enjoying freedom from fear or want, after all, if you cannot enjoy freedom from poorly co-ordinated colour schemes?  [emphasis added]

In the 1950's, fewer than 5% of American workers needed licenses.  Now, almost 38% need some sort of license or certification.  This tends to crush small businesses:

Jestina Clayton is an African hair-braider with 23 years of experience. But the Utah Barber, Cosmetologist/Barber, Esthetician, Electrologist and Nail Technician Licensing Board told her that she cannot practise her craft unless she first obtains a licence—which means spending up to $18,000 on 2,000 hours of study, none of it devoted to African hair-braiding.

Assuming she can get a job, Ms. Clayton's training costs will have to be passed on to her customers.  Forcing prices up is what licensing is all about, of course.  When the Florida legislature tried to deregulate 20 occupations like hair-braiding and teaching ballroom dancing, people who already had licenses lobbied fiercely to keep the rules in place to keep potential competitors away.

Bottom Line

  • Given that we can't fix our education system, we'll need manufacturing to provide jobs for the forseeable future.
  • Chinese and Indian wages and regulations are rising fast enough to make it worthwhile for companies to consider backshoring or at least not moving so many jobs overseas.
  • American regulations have been busy, too - 81,405 pages of new regulations were printed in 2010 not counting the major rules which will flow from Obamacare and from the Dodd-Frank financial regulation law.

We wonder which will grow fastest - American regulations or Chinese and Indian wages.  If overseas costs grow faster than our costs, American manufacturing may survive.

If our regulators have their way, on their other hand, there'll be no American factories to regulate.

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Bureaucracy.
Reader Comments

Yet another reason to make sure liberals aren't elected in 2012. If we can pull and push the Republican leadership to keep standing up for conservative principles - and dilute their ranks with Tea Partiers - we may just be able to start turning the ship around.

June 6, 2011 9:52 AM

I will make this short, so as not to ruffle the feathers of the choir.
This idea that the system is divided by liberals/conservatives, should have long ago been seen through as the cycling of these two synthetic oposits should be apparent in that regardles of which "party" is in power, the same agenda continues unabated and undisturbed.

Those who continue to believe in this phony dialectic are forever stuck with the results of said synthesis, and the "ship" will never turn around.

June 6, 2011 12:10 PM

"If our regulators have their way, on their other hand, there'll be no American factories to regulate."

Democrats used to understand this concept before the Fabian Socialist "progressive" movement created the modern state of liberalism we see today. Any conservative that is waiting to see if America will decline into dictatorship is fooling himself. We already have a dictatorship of regulators. As lfon said, vote them out or be prepared for a lot more of the same.

June 6, 2011 12:41 PM

"vote them out or be prepared for a lot more of the same."

Dibold, ever heard of it? The "vote" is rigged.
Good luck with that one.


June 6, 2011 12:51 PM

"Dibold [sic], ever heard of it? The "vote" is rigged."

Balderdash. Diebold, which makes many voting machines, is generally portrayed as the Republican equivalent to ACORN - a source of fraudulent R victories.

Why, then, did Barack Obama win, and the Democrats control the Senate? If there's a fraudulent conspiracy there, it's a pretty darn ineffective one.

June 6, 2011 12:57 PM


See my post above at, June 6, 2011 12:10 PM


June 6, 2011 1:43 PM

Good point about theater, willie. I have a friend who said if he thought of it as government he'd cry, but if he thought of it as entertainment, it was pretty good. He had to buy a ticket anyway, so he might as well enjoy the show.

Re your earlier comment, if elections and politicking are a phony dialectic, what's the answer?

June 6, 2011 6:07 PM

"if elections and politicking are a phony dialectic, what's the answer?"

"When in the course of Human Events it becomes necessary"...


June 6, 2011 6:27 PM

Business licenses on their face, seem like governance for the sake of governance....and charging for the licensing is just funding the bureaucratic, for the sake of passing out hack jobs to the unemployable.

I am under the impression that, if a Gov (fed, state or matter the level) were serious about getting businesses to their areas...they would wave the fees (yes, businesses would still have to comply with ordinances...but just not pay for the inspections...if that gov actually wanted them there in the first place). Or allow its citizens to start up home businesses without those said fees...and no tax paid on income upto 1/3 of the mean average earnings of that area.

Business by its very nature wants to grow....but it makes it a whole lot easier to do so, if you are not in the red before you turn a profit.

June 6, 2011 9:40 PM

Bush Sr., Clinton, Bush Jr., Obama are simply rotating tyrants in a raging river posed to rush over the falls. None of these presidents were in control. The system is so entrenched in a fabricate despotism that most people are unable to emotionally deal with the prospects of a global gulag staring them directly in the face. They attempt to cope by perfecting their own denial. The inevitable bankruptcy of the paper chase financial fraud is too frightening to alter the collective behavior of society.

Allowing corporatists to dominate the economic landscape is a formula for feudal serfdom. When the Roman Empire ended, the barbarians were blamed, when the true cause was the implosion of an ingrained and corrupt imperial paper tiger. As our day of reckoning approaches, people want solutions. All they get is more debt piled on the insolvency of yesterday’s obligations. The elasticity of the balloon is about to pop.~batr

June 6, 2011 10:41 PM

You're right, Willy, letting corporations dominate is a recipe for serfdom, but what's the difference if Obama, Bush, Bush, Clinton, etc., dominate? We're serfs either way.

What's your solution? At least we have jobs if we're business serfs.

June 7, 2011 6:24 AM

"At least we have jobs if we're business serfs."

For the time being Fred. As you may have noticed, we are on FFWD>> going down the tubes. It's like a runaway train and the tracks are out ahead...

What is the solution when the calculation is that the forward momentum is to great to stop in time even in the brakes were put on--and we see that they are not, but the throttle is full forward?


June 7, 2011 10:04 AM

Wait wait wait wait. How did we go from what the Article's Topic was/ corporatism?

Ok, I'll play, just this once...

Want to avoid all this "doom and gloom" off your bills. Live with in your means, and find a way to grow your savings, so it works for you or allows you to do more work with it. Make yourself become an asset, unto yourself.

Best way not to become a "feudal serf to a business" your own.

You should spend less time wringing your hands over "it", "if" things are as dire as you suggest, why are you here proselytizing? For you have all but admitted that its too late to right the ship. Would seem more prudent and credible if you offered up some form of contingency.

See that's the thing with the doom and gloom'ers; we are always on the cusp of a break down of order/tyranny/financial collapse/scarey death rays from a yet to be known alien races/dibold king makers...but yet they rarely offer any coherent workable solution to avert this imminent doom, or a way to weather it (utilizing principles steeped in Occam) and YET the sun always rises.

It is like armchair quarterbacking the special Olympics.

June 7, 2011 11:07 AM


What' that "Topic"? US Manufacturing. What is the bulk of US manufacturing? Corporate.

Small minds see small horizons.

Rather than play to candy coated daydreaming, I prefer reality.
Everyone has the tendency to look away from hard truths. But this is moral cowardice--and exactly what put the US in this bind in the first place.
What ever the answers are, they won't be correct if they don't answer the right question.

You can only pretend that I exagerate because you refuse to look the situation square in the eye.

Try this for a wake-up call:

June 7, 2011 11:43 AM

Let's play a game. Its called spot the logical fallacy...did you see it? ...I knew you could! For those who didn't catch it, it was an argument from Authority and an Argument from the Unknown.

Look, you were the one who made the point of Feudalism. I pointed out the best way to get out of it. (If it is all based upon debt) From viewing history, and understanding what feudalism is, and the result of what/how the caste system (inherent to it) fits in.

You are entitled to your opinions..but not your facts...yes...most people choose to look away...but you cannot change city hall...and with what is being argued...what is is much easier to get elected to it, or work within its confines...and then run the situation in accordance with whatever code you chose to ascribe to.

You used Moral Cowardice. Morals are relative to the person. I chose to live in a real of logic and facts. Are facts, perceptions? Which are we arguing?

I tend to reject perceptions for sake of getting the bottom line. Bottom lines are generally undeniable. That bottom line says...if you see a train coming down the tracks, it is generally best to get out of the way and let it pass, rather than stand in the tracks and point "Holy Crap train!!!!1111!!!!ONE!!!!111!!Eleventy million one hundred and one!!!!!111!" and perpetually harp on it till someone takes note...while you get turned into a squishy goo (if that is indeed the case)

Experience has taught me to recognize a situation for what it is, and act accordingly, not for what it is perceived to be, and then fumble around like a blind man trying to find a flash light.

June 7, 2011 12:38 PM

Look, the point is...commenting on an article, and then hijacking that discussion towards the ends of some sort of global conspiracy...really does neither side any good.

Which is why people generally like to stay on topic. Keeping on topic...exchanges ideas for honest debate...hijacking generally forces a discussion from defensive positions...and annoys no debate (pertinent to the topic) ensues.

The topic was businesses and must incorporate corporations into the discussion...but keep it pertinent....not amorphous. If we want jobs back...then discuss that (see the hill, take the hill, not the field 2 miles works for hills)

June 7, 2011 12:49 PM

"From viewing history, and understanding what feudalism is, and the result of what/how the caste system (inherent to it) fits in."

The issue of 'corporate feudalism" is certainly not a novel idea that I pulled out of my own hat ebtomfool.

This is an issue discussed by many in this day and age, a simple reference to Hayaks, ROAD TO SERFDOM, should be adequate.

I simply don't care about any of the rest of your rant at me, other than to acknowledge that yes indeed we are both entitled to our own opinion.

June 7, 2011 1:47 PM

"The issue of 'corporate feudalism" is certainly not a novel idea that I pulled out of my own hat ebtomfool.

The issue of 'corporate feudalism" is certainly not a novel idea that I pulled out of my own hat ebtomfool."


Nor were the incoherent ramblings of Naom Chomsky in "Manufacturing consent"...weren't either. (no I am not a me...I am a "leave me the hell alone-ist")

What both do not advocate, is paying attention, self determination, and (to a bigger degree on the ref I cited) personal responsibility to ones self. (the perpetrator is clear, the point of contention is the solution)

You ignore my "rant" at your own folly, Because clearly acting the part of chicken little, has clearly worked (please detect sarcasm when it appears).

Just try to avoid RR'ing topics? I am sure you have good ideas..but RR'ing is teh sux for debate.(being constructive)

June 7, 2011 2:47 PM


An Argument from the Verbose, does not an argument make. One more time...An Argument from the Verbose, DOES NOT an argument make.

It is not a "subtle game of pretend" to expect people to stay on topic when having a discussion. What it manners and courtesy, and an ability to carry on a discussion in a coherent, non-adhd fashion.

That is a fact. Do you deny this is a fact? (circle one) Yes No
What are facts?

FACT...The article was about Manufacturing...possibly entertaining strategies on how or why it would happen....not Dibold King makers, not the Bush/clinton/bush/obama cabal, not brainwashing.

June 8, 2011 5:55 PM
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