The return of manufacturing to the U.S., also referred to as the “repatriation” or “re-shoring” by American and non-American companies alike, on the surface sounds like good news for employment. However, this is not necessarily the case.
Although manufacturing output over the last 60 years has grown roughly by 3.7% annually, employment has stayed mostly flat during this time. Why does this continue to be true, even as many companies have been moving manufacturing back to the U.S. since 2010?According to research by MIT Sloan Professor David Simchi-Levi, there are a few reasons.
- The rise in the use of technology as well as plant automation and robotics in manufacturing facilities. More technology and robots means fewer human workers.
- The types of jobs required for these new, more modern plants are different than jobs needed a generation or two ago. For example, the highly automated manufacturing facilities of today require different types of talent in their employment pool. Today's plants need more engineers who can fix the robots and less lower-skilled employees who would otherwise do the work that is now automated.
- In cases where manufacturing plants do require more employees, and hence could boost employment here in the U.S., many people coming out of school are simply not prepared to work in the field of manufacturing. Some might say manufacturing is not in our "mindset." So, while some manufacturing companies are hiring, the employment pool does not meet the company’s needs—which means no lift in employment.
Repatriation Will Result in More Opportunity for U.S. Workers
The good news: repatriation is generating more opportunities overall. Arguably, if education and training is geared to the needs of today's manufacturing plants, there will be a pool of jobs for these properly trained individuals. Also, not every company can afford big-scale automation. Businesses that cannot commit to automating their plants often turn to low-skill labor to meet their production needs. Other companies may take a hybrid approach; for example, incorporating some level of automation as well as manual production. In these scenarios, there will be more of a bifurcation in the workforce: highly-skilled engineers to operate and repair the high-tech and robotic equipment and lower-skilled labor to do tasks that are not cost-effective to automate.
The bottom line is that the return of manufacturing jobs to the U.S. is still a positive development. Although employment might not rise drastically as a result of this shift, there will be a need for workers in these modern plants. And, American workers can once again look to the manufacturing industry for unique employment opportunities—a notion that a couple decades ago didn't seem possible.
David Simchi-Levi is a Professor of Engineering Systems at MIT and the Co-Director of Leaders for Global Operations. He teaches in the Future of Manufacturing program and in Supply Chain Strategy and Management at MIT Sloan Executive Education.