“Automation is Voldemort: the terrifying force nobody is willing to name.”
Manufacturers Coming Home:
The idea of offshoring has become a magnet for all the vitriol of those caught at the wrong end of globalization. Since the 90s, North American companies have been lured overseas, most famously to China, to take advantage of lower labour rates.
Manufacturers didn’t move offshore because they wanted to. They were driven there by competitors’ increasing competitiveness. The trend has fueled a generation of workers’ rage and, some would argue, a new era of political populism. But the tide has turned back to North America. As China prospers, labour costs rise. Land to set up factories becomes scarce. Long supply lines, increasing domestic backlash, and the need for overseas oversight becomes tedious.
In 2014, the US saw a net increase of 10,000 reshored jobs. It’s been climbing quickly since. Canada has lagged behind, largely because we had less offshoring to begin with, but our pace is quickening, too.
What companies are leading the reshoring charge with their manufacturers? (as of March, 2017)
Walmart: 4,838 North American jobs
Ford: 3,200 North American jobs
Boeing: 2,700 North American jobs
General Electric: 2,656 North American jobs
General Motors: 2,345 North American jobs
The Dark Side of Reshoring:
In the 90s, the bulk of the jobs lost to offshoring were in production and assembly; Factory jobs, and lots of them. Many reshoring companies look very different than when they left. The current automation explosion means that traditional factory jobs are rapidly disappearing. Manufacturers are returning seeking high skilled jobs in research, engineering, marketing and management.
Bottom line: companies are often reshoring because they don’t need as many workers, which is what eliminates the offshoring advantage. The jobs they’ll be offering will be fewer and higher skilled.
What Reshoring Means for Your Business:
Reshoring is a symptom of the global jobs earthquake that automation is beginning to unleash. Low skilled jobs, including not only traditional manufacturing but also retail, food industry, service sector, office admin, computer programming, and transportation, are all at risk.
Highly skilled jobs (including the people who design and build the robots fueling automation) will be in high demand and have short supply. Your competition for attracting talented people is about to get intense.
Automation has always cost jobs. Cart and buggy makers found themselves out of luck when Henry Ford came to town. But the shift has never been so rapid, and across so many industries, as what we’re witnessing now. In other words, automation has replaced offshoring as the new killer of lower skilled jobs. If you need highly skilled workers and have been assuming that they will always just “be there,” you may want to examine what incentives you could offer them.
Expect reshoring to accelerate the pace of technology innovation in the domestic arena. Companies are usually returning because advances in automation are eliminating the wage gap. If you’ve been pulling back on R&D due to the economy, you should reconsider. But that’s for another article…