Editor's Note: This column was written by Job Creators Alliance member and former NFL quarterback Fran Tarkenton.
Manufacturing is on its way back in America. Growth in this sector is great news for America, and especially great news for small business people.
For a long time, it’s been a common complaint to hear that Americans don’t make anything. All our manufacturing jobs were gone, and everything we buy is made in China. Production just wasn’t an option in the U.S.—and the companies that did typically had to go into battle with products at significantly higher prices.
This was all thanks to the low cost of labor in other countries, compared to the extremely high cost here in America. But that’s changing.
The cost of labor in major outsourcing locations is rising sharply, most notably in China. At the end of September, the average minimum wage in most of the country’s provinces increased by more than 20 percent. And with the start of this month, most provinces raised minimum wage another 13 percent, and other provinces raised it even higher, as high as another 23 percent. Overall, experts expect Chinese wages to rise by 80 percent in just the next 5 years, sending the price of goods manufactured in China skyrocketing.
What does this mean for American manufacturing? It means that the cost of producing goods here in the United States will no longer be prohibitive. It means that the benefits of putting manufacturing jobs in American would no longer be outweighed by the exorbitant costs.
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As the labor calculus changes, the savings companies manufacturing in the U.S. get on transportation, travel, and other things become a bigger incentive. These factors, along with the efficiency and skill level of the American worker, are all working together to make manufacturing in the United States viable again.
We’re already seeing results. The manufacturing sector has added jobs in each of the last two years. The last time there was an increase in manufacturing employment for even a single year before that? 1997.
And manufacturers are not repeating the mistakes they made decades ago, when short-sightedness created spiraling costs and unsustainable business models. According to the American Small Manufacturers Coalition, more than 86 percent of manufacturers cite “process improvement” as important or even highly important to their future, while 84 percent cite “customer-focused innovation.” These entrepreneurs are focusing on improving their business and getting better every day, not getting comfortable and letting things slip away.
This is a trend that has me excited, and I hope to see it continue. I believe we will especially see a growth in Right to Work states, where workers have the right to climb—or fall—based on merit. The closed shop model is what got us into trouble the last time, with its ever increasing costs and ever decreasing productivity. Our workers are the most exceptional in the world, and the development of incentivized profit-sharing plants, encouraging workers to work harder and smarter, will be at the heart of sustainable growth in manufacturing.
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