Why Trump can bring manufacturing back to the US
And why it won’t bring back jobs
Changes in technology and value chains present US manufacturers with new opportunities to compete in the global market, but it doesn’t turn back the clock for the average American worker. That’s what McKinsey writes in a new report on manufacturing in America:
Factor costs are changing, too. Wages are rising in emerging economies, automation weakens the case for labor arbitrage, and the shale boom has made energy cheap and abundant in the United States. More of the world’s production is up for grabs; global value chains are shifting as firms emphasize service-based business models and proximity to markets, suppliers, and innovation partners.
In essence, the reason Trump can bring manufacturing back to the US is the very reason jobs – and wages – won’t meet the needs of Americans. McKinsey elaborates:
Workers now have fewer options when their pay stagnates. Rapidly falling costs of automation and the availability of lower-cost global labor have created more options for companies. As the nature of work has changed, the relationship between companies and workers has weakened. Temporary work arrangements and outsourcing are becoming more commonplace, and firms are better able to predict demand and schedule labor in smaller and more erratic increments. Workers now have decreased mobility, and the decline of unions has weakened their bargaining power. Large segments of the labor force lack the skills that the marketplace values.
The report raises more questions than it answers, while imploring that more has to be done to increase wage growth, which could set off a virtuous cycle of growth. How to make growth more inclusive remains the US$18 trillion question.