Will Re-Shoring Reverse Job Losses?

Walmart’s pledge to step up purchases of US-made goods by $250 billion over 10 years received much fanfare when the company announced the plan in 2013. Fast-forward three years, and the pledge by US president-elect Donald Trump to “make America great again” has struck a chord in American towns and cities that have seen their manufacturing bases significantly decline—to the tune of 5.2 million manufacturing jobs (from 17.5 million to 12.3 million) lost since the 1990s.

But here’s the rub: According to Federal Reserve Economic Data, manufacturing output has actually risen 85% in the US since 1987, while manufacturing has declined from 17.3% to 8.5% of total employment.

Offshoring to parts of the world with lower labor and business costs played a part in the decline of labor-intensive manufacturing jobs, but many jobs have also been replaced by automation.

For Walmart—the world’s largest company by revenue, as well as the world’s largest employer—reshoring makes headlines. But the bulk of the jobs provided by the company are in retail and distribution, as opposed to manufacturing. Its suppliers may well bring manufacturing back to the US, but will that result in significant new employment?

Boston Consulting Group says about 10% of all manufacturing functions in the US are already automated, a share that will rise to nearly 25% in a decade, as robotic vision sensors and product-handling systems improve. A “Technology at Work” study by Citi and the Oxford Martin School at the University of Oxford reports, moreover, that 57% of jobs in the world are at risk from automation and says these jobs are not just in manufacturing—they include jobs in transportation and logistics and office support.

A typical manufacturing job paid $25 per hour, with benefits, back in 2000; a comparable service-sector job today pays $12, without benefits, suggesting that finding a solution to such pay disparities and retraining workers is a better option than fighting trade wars.