Outsourcing is losing its allure.
Small U.S. manufacturers have been bringing manufacturing jobs back to the U.S. over the past two years after outsourcing, Bloomberg Businessweek reports. Experts say this is because U.S. manufacturing has steadily become more competitive, and coordinating with foreign manufacturers an ocean away is inconvenient.
Jerry Anderson, co-founder of LightSaver Technologies, told Bloomberg Businessweek that the company recently decided to move their manufacturing work from China to California because outsourcing had been a hassle, even though it had been 30 percent cheaper. "Factor in shipping and all the other B.S. that you have to endure. It's a question of, 'How do I value my time at three in the morning when I have to talk to China?'" he told Bloomberg Businessweek.
Booming developing countries in Asia have succeeded in raking in manufacturing jobs, both because of lower wages and factory clusters. But as wages rise for manufacturing workers in China and elsewhere in Asia, outsourcing is becoming less attractive to some U.S. businesses.
Meanwhile, new U.S. manufacturing hires have been forced to accept substantially lower wages because the recession has thrown so many people out of work. The U.S. still has about 2 million fewer manufacturing jobs than it had before the recession, according to Dean Baker, co-director of the Center for Economic and Policy Research. As a result, U.S. manufacturing jobs are coming back, but with lower pay.
Small businesses will play a key role in helping determine whether manufacturing rebounds strongly in the U.S., The Huffington Post reported in February.
China is still attractive when it comes to short-term costs: Manufacturing workers in the U.S. were paid an average $19.18 per hour at the end of 2011, compared to roughly $2.18 per hour in China. But building manufacturing roots in the U.S. may prove more valuable to small businesses over the long run: Productivity in the U.S. has spiked, and wages in China grew 11 to 14 times more quickly than U.S. wages between December 2010 and December 2011.