I’ve been spending a lot of time recently exploring the resurgence of manufacturing in Silicon Valley and the surprises just keep coming.
Now this: The Boston Consulting Group says it has revised its projection of U.S. manufacturing job growth — upward. Yes, the very outfit that I recently said expected that by the end of the decade between 200,000 and 600,000 production jobs would move back to the U.S. from China, now has an even rosier prediction.
My Sept. 19 column was focused primarily on rising labor costs in China and the productivity advantage enjoyed by the United States. It cited a March 2012 BCG report. But now the Boston Consulting Group has taken a close look at rising costs in Europe and other developed countries and its effect on the global balance of manufacturing jobs.
Here’s a bit of a recent press release from BCG:
“Combined with jobs created as a result of reshoring, higher U.S. exports could add 2.5 million to 5 million jobs by the end of the decade, as manufacturers shift production from leading European countries and Japan to take advantage of substantially lower costs in the U.S.”
To make an apples to apples comparison, I should point out that the 2.5 million to 5 million jobs go well beyond jobs coming back from China. The prediction includes jobs created to support manufacturing and those owed to increased exports in the coming eight years. The Boston Consulting Group initially predicted the combination of jobs returning and jobs from new exports would total between 2 million and 3 million.
The increase will come about primarily because the United States will gain a huge advantage in labor and energy costs, thanks primarily to increased productivity and cheap natural gas, the consulting group’s latest research concludes.
“BCG projects that by around 2015, the U.S. will have an export cost advantage of 5 to 25 percent over Germany, Italy, France, the U.K., and Japan in a range of industries. Among the biggest drivers of this advantage will be the costs of labor, natural gas, and electricity. As a result, the U.S. could capture 2 to 4 percent of exports from the four European countries and 3 to 7 percent from Japan by the end of the current decade. This would translate into as much as $90 billion in additional U.S. exports per year, according to BCG’s analysis.”
The advantages will mean that foreign companies will actually begin producing in the United States with the intention of exporting their products from the U.S. to Europe and Japan, the report says, putting the United States on the receiving end of the off-shoring trend many here have decried.