Washington, D.C. – Today, Business Forward Foundation released a new report, Reshoring America: Steps Washington Can Take to Boost Manufacturing in the Heartland. The report explains how automation and the shift to lower cost markets have driven a steady decline in American manufacturing since the 1940s, and why states in the Heartland are particularly well-suited for reshoring operations.
The report includes findings from Heartland Forward, a “think and do” tank that recently published Reshoring America: Can the Heartland Lead the Way?, which explains why offshoring was never as good a bargain as manufacturers expected due to trade-offs like higher shipping costs, lost IP protection, the shrinking labor cost gap, and quality control issues.
“States in the Heartland experience lower costs for labor, real estate, and shipping than coastal states,” said Elizabeth Fairchild, Executive Director of Business Forward Foundation. “The labor cost gap used to be enough to incentivize offshoring, but companies have underestimated production costs in countries like China by about 20 percent due to unanticipated trade-offs.”
The COVID-19 pandemic demonstrated the volatility of global supply chains. In a June 2020 survey, 70 percent of firms operating overseas said they are likely to reshore in the future. “American companies are coming back home,” Fairchild said. “And high value workforces, low costs of living, and proximity to major markets all give Heartland states an advantage in attracting their investments.”
“Relocating does come with short-term costs, but we can compensate by training our workforce, modernizing infrastructure, and boosting manufacturing R&D,” Fairchild explained. “To make the most of this opportunity, Washington should promote investment in high growth sectors most likely to reshore, boost STEM education and training, and fund infrastructure improvements to decrease shipping and energy costs.”
The manufacturing jobs now available in the U.S. require skills and pay well — but by 2028, as many as 2.4 million of these jobs could go unfilled. “We have a chance to simultaneously rebuild our manufacturing sector and rebalance Heartland economies. If we don’t make the necessary investments, the U.S. could miss out on $2.5 trillion dollars in economic output by 2028,” Fairchild added.
The Biden administration set aside $700 billion to revitalize American manufacturing through R&D and government procurement, but more must be done to attract and retain American manufacturers in the long run. Read the report to learn more.
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The Business Forward Foundation is an independent research and education organization that takes a business-minded look at policy issues affecting America’s economic competitiveness. Our work combines insights and advice from business leaders across the country with rigorous policy analysis. Through white papers, issue briefs, conference calls, and other events, we educate policy makers and the public about climate change, immigration reform, infrastructure investment, the future of work, and other critical issues.