A report from the Reshoring Initiative, a U.S. organization dedicated to encouraging and tracking the number of overseas jobs that move back to the U.S., says the country is on track to return nearly 350,000 jobs this year, according to the Wall Street Journal.
COVID and its related supply chain problems are big factors. But the Biden administration has also been successfully pushing laws that will increase the pace of job returns:
To be sure, globalization has been a tailwind for investors and large companies for much of the past 30 years, particularly U.S. firms. Increased trade across borders boosted profits and productivity and allowed countries to focus on the goods and services they were best equipped to produce. Globalization has also provided multinational companies with new customers and new pools of low-cost labor.
But the Covid-19 pandemic, which snarled supply chains worldwide, pushed many executives to think about bringing their business closer to home. Russia’s invasion of Ukraine, which upended commodities markets, is another motivator. So is the possibility of a conflict between China and Taiwan, which produces the chips used in smartphones, personal computers and cars.
The U.S. government is also luring companies back. The Chips and Science Act and the Inflation Reduction Act, both passed this month, provide tax breaks and other incentives for building and investing in manufacturing centers for goods such as semiconductors, electric vehicles and pharmaceuticals.
Investors’ increased focus on carbon emissions also has bolstered the need for closer-to-home supply chains. Carbon pricing mechanisms and taxes recently implemented in the European Union and elsewhere will further reduce the appeal of extensive cross-border supply chains, Barclays economists wrote in a recent note to clients.
Barclays found that large S&P 500 companies are recruiting more in their home countries and slowing cross-border M&A activity.
“Globalization is in retreat,” the firm’s U.K.-based economists Christian Keller and Akash Utsav wrote.
I love how the WSJ only mentions “pools of low-cost labor” as a reason for jobs going overseas originally. If you’re spending all that money to ship your goods all the way from China and Indonesia to America, where do you think the biggest source of savings is going to be? It’s been the use of low-paid workers in countries where labor, safety and environmental laws are weak.
Anyway, thanks Biden for delivering on your jobs incentives promises!