You’ve heard of “off-shoring.” And depending on your age, “Pauly Shoring.”
But the buzz word for the next few years could be “re-shoring,” or the return of manufacturing jobs to the United States that were previously shipped overseas.
According to an investment analysis from Charles Schwab, declining American energy prices are helping narrow the production efficiency gap between the United States and China – making it more cost-effective for corporations to manufacture goods stateside.
“If ‘offshoring’ was a business buzz word of the nineties and the aughts, then ‘reshoring’ is this decade’s replacement,” the analysis states. “Companies that were initially lured by lower costs overseas are now bringing production back home.”
Schwab’s analysis quotes a 2012 study by The Hackett Group which reveals it is currently 30 percent less expensive to produce goods in China – down from 51 percent less expensive in 2005.
That trend line is expected to continue moving in America’s direction so long as U.S. manufacturers are able to reap the benefits of declining energy costs (thank you, “fracking”) – and as long as Chinese labor costs continue to climb.