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The Right Approach: The Rebirth of Made in America

The topic for this discussion came to me, as most of my best ideas do, during a casual conversation about life over a cold beer. Having finished day one of a nine-day motorcycle trip, my friend Mike and I had just settled in at a friendly watering hole to soothe away the aches and pains of spending all day on 1,000 pounds of Milwaukee iron. We have had some very interesting discussions over the years on a variety of topics, but mostly our conversations tend to center around Harleys, sports, or politics.

This particular evening, Mike turned to me and asked “Steve, I want your opinion on something. Is American manufacturing back?” Now this is not quite the radical departure from our normal topics as you may think. You see, Mike is not only a good friend and fellow Harley enthusiast; he is also a fellow small business owner whose sales have been significantly impacted by Asian competition. Like Mike, I had grown up in this business “making stuff,” and before I had time to even think about an answer, I blurted out a resounding “Hell yeah, it’s back,” as my American pride and loyalty involuntarily kicked in. But after thinking more about it in the following days, I thought it would be worthy of some research to support my well-intended gut reaction.

The Lost Millennium

The year was 2000; the most popular song was “Breathe,” by Faith Hill, the St. Louis Rams won the Super Bowl, gas was $1.26 a gallon, Y2K turned out to be a non-issue, and American manufacturing was in the tank. Using the metric of ‘Services as a Percent of Gross Domestic Product (GDP),’ in the year 2000 the United States led all industrialized countries at 80% (CIA World Factbook)[1]. Simply put, 80% of our revenue as a country came from servicerelated industries, and only 20% from manufacturing. The data provided by the Handbook of U.S. Labor Statistics[2] for the percent of the U.S. labor force in each sector was equally disturbing.

Using 1950 as a baseline, 60% of U.S. employees worked in manufacturing and 40% in service industries. By the year 2000 this mix had changed to only 20% in manufacturing and 80% in service. While these statistics are great news if you are selling insurance, they are catastrophic for the once mighty American manufacturing sector. The sad state of affairs was that the United States was no longer a manufacturing nation. This is painfully obvious when looking at Figure 1, which shows that beginning around 2004, bartending jobs began to outpace manufacturing jobs.

Reshoring

This interesting buzz word surfaced around 2010 and refers to the return of work to America that had been previously lost to offshore competition. This reversal was being driven by a number of factors as the economic conditions were forcing customers to change their focus from unit cost to total cost of ownership.

Perhaps the grass isn’t always greener on the other side (of the world)! The bulk of reshored jobs—about 60% from 2010 through 2016— came from China, according to a recent report by the Reshoring Initiative[3]. Labor has become more expensive in China than in the past, with Chinese wages going up 12−15% a year for the past 15 years. Figure 2 presents a breakdown by country of where all the reshoring jobs are coming back from.

To read the full version of this article which appeared in the March 2018 issue of PCB007 Magazine, click here.