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Manufacturing’s coming back

Update – And with it will come higher workers comp premium revenue.

The most comprehensive report on the resurgence of American manufacturing is in this month’s Atlantic magazine.  (Over at WorkersCompInsider, Julie Ferguson beat me to the punch on this piece – Julie has quite a bit of insight into the trend and other reports as well…

Among the many companies bringing jobs back from China, Mexico, and southeast Asia are GE (appliances), .

Manufacturing jobs are returning to America from overseas for multiple reasons (paraphrased from Atlantic and other sources) –

  • Transporting stuff in oil-powered ships is much more expensive these days; oil prices are three times higher than they were 2000
  • The natural-gas boom in the U.S. has greatly reduced US manufacturing’s energy costs; costs are much higher in Asia
  • Wages in China are rising 18 percent a year, and by 2014 wages around Shanghai will be 60% of those in Alabama.
  • American unions are changing and adapting, getting more flexible and working much more closely with management to drive “lean manufacturing.”
  • U.S. labor is getting more and more productive, reducing the percentage of manufacturing costs consumed by labor.
There’s also something much more fundamental going on here.  Manufacturers are finding out the truism that lower labor costs “win” reflects a superficial understanding of costs, and in many cases is just wrong.
Moving manufacturing overseas removed manufacturing expertise as well.  And while that didn’t seem to be much of an issue fifteen years ago, it turns out that when the people designing, building, selling, and using the appliances/machines/machine tools are in the same building or area, they can quickly figure out how to reduce materials cost, dramatically increase build quality, and streamline manufacturing, further reducing cost.  Moreover, the cycle time can be drastically shortened as well.
That’s becoming increasingly important as products’ life cycles have dropped from seven to two years.
What does this mean for you?
While manufacturing is returning, the working conditions, safety issues, injury types and risk management of all of the above won’t be the same.  There’s much more automation, much less “manual” labor, and different risks than there were back in the day.
Be ready.


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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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