To the chagrin of the slowly recuperating U.S. economy, the vast trend of offshoring — outsourcing jobs to cheaper overseas locations — looks to be alive and well.
Yet there are tiny signs of backlash, including right here in Florida, amid the gusto by big multinationals to employ more overseas and fewer here.
I'll explain more about that in a moment. First, though, can we agree on this? Offshoring deepened the U.S. recession, killing domestic jobs for overseas expansion.
As Wall Street Journal economics editor David Wessel recently wrote, big brand-name companies that employ a fifth of all U.S. workers have been hiring abroad while cutting back at home, "sharpening the debate" over globalization's effect on our economy.
U.S. Commerce Department data show that during the 2000s, companies cut their work forces in this country by 2.9 million while increasing employment overseas by 2.4 million. That, Wessel wrote, is "a big switch" from the 1990s, when they added 4.4 million jobs in the United States and 2.7 million abroad.
Not long ago, it was easier to argue that offshoring was critical to survival. Asia, Central America and other lower-cost areas enabled U.S. companies to produce goods or services for less than the cost of doing so in this country.
If a U.S. company could not sell a product in the global market at a competitive price and still make a profit, then it was not long for this world.
Now the debate is reheating. Offshoring, it seems, comes with hidden costs.
Genicon CEO Gary Haberland, whose Winter Park company makes laparoscopic surgical equipment, says his business was lured by the "sexiness" of offshoring to take some of its manufacturing to China in the early 2000s. But things soon began to go wrong, he explained at a recent conference of Florida medical manufacturers in St. Petersburg.
"Genicon products are doing quite well in Asia," he said. "We just never made them" — meaning his product designs were stolen and reproduced without penalty by others in that country.
Genicon products that were made in China started to develop rust, Haberland found. "Why was stainless steel rusting?" he asked. Because it wasn't stainless steel, forcing product recalls.
Genicon reversed course and set up manufacturing in the United States. "We're not making Tonka toys," said a chastened Haberland.
Largo's JS Karaoke, which made karaoke machines in China, recently found that size-sensitive shipping costs for his big products were becoming prohibitive. CEO Jack Strauser told me earlier this year that he would start manufacturing his machines in Florida as the cost difference became negligible.
Is this just the beginning?
Offshoring adviser Boston Consulting Group predicts a U.S. "manufacturing renaissance" as soaring factory pay in China shrinks labor savings over U.S. workers.
If it were only that easy. The world's next great wave of middle classes — the folks who will buy most of the stuff made worldwide — is taking place overseas in places like China, India and Brazil. The U.S. middle class is vastly diminished, with many folks holding on to that status by their fingernails.
Even so, who thought in 2011 we'd hear from businesses ready to make a go of it by returning jobs to Florida?
Contact Robert Trigaux at email@example.com.