Finances & Money

Bringing the Jobs Back Home

The Washington Post had an interesting article highlighting how China’s outsourcing appeal is dimming in the wake of rising energy prices and a few other economic and social factors:

Soaring energy costs, the falling dollar and inflation are cutting into what U.S. manufacturers call the “China price”– the 40 to 50 percent cost advantage once offered by Chinese producers.


Other factors are helping drive a flight from China: the increasing value of the Chinese currency, the yuan, vis-à-vis the dollar; a new labor law; the repeal of some export tax rebates; and inflation. Many companies say they are also motivated by a sense of patriotism and environmental concern.

I would also add something else from personal experience. At my first company, post-graduation, I worked in the most specialized department within IT. We thought we were immune to the outsourcing/offshoring bug that the rest of the company was catching. Well, unfortunately we weren’t. But luckily for me, I bailed out just 2 weeks before our department made the announcement that it was going to be sending jobs to Thailand.

These Thai workers were employees of our corporation, but far from integrated into our corporate culture. I won’t argue with the need to become more globally-oriented, but honestly, the company was just looking at the financial end of the deal. What they didn’t see was the pending customer dissatisfaction that would stem from communication barriers (timezone), language differences and the biggest of them all: employee retention.

The article talks about low-skilled manufacturing jobs in countries with huge worker populations from which to select. In the IT field in developing countries, experienced and skilled workers are hard to come by, and as my former company, and many others, learned, it’s hard to keep these workers when dozens or hundreds of other companies are looking for the same skill sets. When the accountants ran the numbers, I’ll bet they didn’t factor in the competition for these same resources. In the end, they’re still working in Thailand, but I’m positive that their initial profit margins are much different compared to the actual numbers they’re seeing today.

The China Numbers aren’t Adding Up Anymore

From the article:

The ripple effects have been far-reaching. The trade imbalance between the United States and China — a source of political tension for years — is beginning to right itself as Chinese exports fall and U.S. exports rise. Global trade routes are being transformed, suggesting a possible return to a less integrated world economy.

The model of outsourcing to China emerged at a time when oil was going for $20 a barrel. In the past few months, oil has been trading at about $110, and many experts say it will eventually hit $200.

This has led some companies to move production from China to northern Mexico, next door to the U.S. market. But others have chosen to relocate inside the United States.

So how much do you think companies spent to pack up their machinery and ship it across the world, only to have to ship it back or pay to build/buy it all over again? For many companies, that cost is the only thing keeping them in China (or other cheap Asian countries). 

But one thing the article doesn’t mention that I think is very important is this: the United States is not the world.

Sure, our country spends HUGE amounts of money on stuff compared to the rest of the world, but recall two things:

  1. China and India make up a third of the world’s population
  2. China and India (and other countries) are coming into a lot of their own money

While the U.S. talks a lot now about frugality, saving money and retirement, the other half of the globe is swimming in newly found cash-flows that can let them eventually become the new America. They’ll find their mailboxes full of credit applications and advertisements for the latest gadgets, clothing, cars and home products, just like we did for the last 20 years. And it’s hard to tell someone with money to not spend it. That’s how America got itself into our current financial predicament.

So while America thinks it’s the center of the economic world, don’t forget that someone needs to produce products for the China and India markets, and those markets have the potential to dwarf the United States’ in just a few decades. Only companies with a majority of business based in America will bring those jobs back. I believe more and more companies will still move overseas to be closer to their emerging markets.

About the author

Clever Dude


  • I don’t know if it’s the best route for the future of America, but I’d love to see our country producing ‘things’ again- tangible things and not just creating more call centers and jobs that only rely on trading money for services and digital bits.

    It sounds old fashioned (and I’m really not that old), but our current path sort of feels like the building of a house of cards to me.

    I like your analysis, it will be really fascinating to watch what happens.

  • Interesting phrase… China becomes the new America.

    I think in the case of China it is not very likely that they will take hold of a “new Chinese Dream” the way Americans took to the “American Dream”.

    * Population controls mean no large families.
    * Communist Country controls the media
    * Large percentage of Poor (America’s consumerism is driven by the middle class, the separation is greater in China between Poor and Well off)

    It is still a topic that I will pay close attention to, as Eden says, it will be fascinating to see what happens!

  • Rising energy costs might bring some jobs back to the U.S., but it still limits a lot of movement -within- this vast country. I’d feel better if we solve our energy issues to ensure efficient distribution of goods & services within the national economy, for starters.

  • I gotta tell you – if your company is producing physical goods (like mine is), there is absolutely no way that the U.S. can compete in terms of manufacturing costs. We are still producing small volumes since we are at the prototyping stage, but if and when we manufacture in quantity, we are not even considering doing it domestically. It is simply not feasible economically.

  • shadox’s opinion is how we got sold down the river in the first place.

    we cut our own throats during the last few years, and we keep supporting companies that helped destroy our economy.

    most people scoff when people want to buy “american first” but those are the same people that cry “why me” when their job gets cut.

    we can easily keep up with foreign markets. it is just convincing the people that if we pay more, our neighbors may be the ones that benefit, and in the long run, we all will benefit.

    you and i, we are not the ones that benefitted from the “walmarting” of america, it is the fat cats with their multimillion dollar wages for basically doing nothing.

    yes, i guess you can consider me a “liberal”…but you know what, i can sleep soundly knowing that i am fighting the establishment and voting with the candidate who wants to punish companies that export jobs elsewhere.

    globalization is the worst thing that happened to america…stop it now while we still can

    (no c.d. my car was built in tennessee 🙂 sure, my computer and tv weren’t built here…but christmas is bringing me a vizio 🙂

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