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Is insourcing the new outsourcing?

White House holds insourcing forum, issues paper citing companies bringing jobs back to US

By Layer 8 on Thu, 01/12/12 - 12:42pm.

It would be a stretch to insinuate that outsourcing of all manner of work outside the US is subsiding substantially. In this warming political season the topic of American jobs and what is happening to them is getting the expected spin and this week the White House took its turn on the wheel saying that the growing trend is US companies are indeed keeping more jobs here rather than sending them abroad.

In addition, at the White House's "Insourcing American Jobs Forum" hosted by President Barack Obama, the president said in the next few weeks his administration would announce proposals to encourage further job creation at home with a number of tax incentives to invest in US employment as well as to eliminate tax breaks for those companies who move jobs overseas - a long touted but never passed proposal.

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Beyond any new laws, what is sparking the insourcing sentiment? During the forum, the White House released a report, "Investing in America: Building an Economy That Lasts" that pointed out a number of insourcing trends:

In recent months, large manufacturers like Ford and Caterpillar have announced large investments in U.S. facilities. In years past, these sorts of expansions have been aimed at facilities in Mexico, China, or Japan.
In 2010, KEEN, the footwear designer, opened a 15,000-square-foot facility to manufacture boots in Portland, Oregon-moving production from China to a location just five miles from its corporate headquarters. The company also makes bags in California and socks in North Carolina.
After watching costs rise in its Chinese factories, Master Lock began bringing production back to Milwaukee-the same place where the company was founded in 1921.
Service firms ranging from customer support centers to software developers to engineers are deciding to invest in the U.S. for their operations. Even foreign-domiciled firms are making the decision to take advantage of American productivity and innovation.
Siemens spends nearly $50 million each year training its U.S. workforce, and ThyssenKrupp spent nearly $5 billion on its new steel and stainless steel manufacturing and processing plant in Alabama. Investments from companies like these reached $228 billion in 2010, an increase from $153 billion in 2009.
Labor costs are lower in places like China, but in many cases, costs in those countries are going up. At the same time, American workers, who have always been more productive than those in other countries, are becoming even more efficient. In the first quarter of 2009 alone, productivity rose nearly 13%.
As economies in other nations grow, there's more demand for U.S. engineers, software developers, researchers, and consultants. At the same time, a range of barriers that once made it hard to market those services across borders have come down. As a result, the United States is poised to expand its trade surplus in services to $146 billion in 2010. Since 2003, that surplus has nearly tripled.
The manufacturing sector is recovering faster than the rest of the economy. Through the course of the past two years, the economy has added 334,000 manufacturing job, and that's the strongest two-year period of manufacturing growth since the 1990s.

Each of those facts is evidence of a growing trend of insourcing, the White House concluded.

The Huffington Post meanwhile made a list of five things the President should highlight in the upcoming State of the Union speech to ensure that it called the "the significant trickle of reshored jobs" becomes a real trend. From the Huffington Post report:

1.Adopt insourcing tax incentives, such as extending a domestic manufacturing tax credit for clean energy and enlarging a deduction for US manufacturing activity. Also, improve the research and development tax credit by making it more generous for innovation that is actually commercialized in America. Finally, adopt a federal tax incentive for companies that reshore high-paying jobs.

2.Work to balance our trade account by continuing aggressive trade enforcement, where a major hat tip should be given to the Obama Administration for supporting domestic industries. But, the Administration must also work to stop China's currency manipulation and lower our record trade deficit with that nation.

3.Invest in infrastructure to make our economy more efficient, our businesses more competitive, and to create some demand for manufactured materials.

4.Apply Buy America laws to make sure that our manufacturers get a reasonable preference for federal procurement on everything from commemorative wristbands to major bridge reconstruction. The Department of Transportation does a good job of applying the Buy America laws on the books, but other agencies need to step up, and loopholes need to be closed.

5.Invest in our workers to ensure we have skilled human capital on the factory floor, in the research lab, and in the executive suite. Our educational system is built towards guiding every child into a four year college and every MBA onto Wall Street. That shouldn't be the case. We must rebuild our vocational education system from the ground up, or we will never make manufacturing great again.

Follow Michael Cooney on Twitter: nwwlayer8 and on Facebook

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