Americans are likely to hear more about “insourcing” as the 2012 presidential campaign unfolds. President Barack Obama advanced the term during a February 15 trip to Milwaukee, Wisconsin. “You’ve all heard enough about outsourcing,” he explained. “Well, more and more companies like Master Lock are now insourcing. They’re deciding that if the cost of doing business here is no longer much different than the cost of doing business in countries like China, they’d rather place their bets on America.” Master Lock is a padlock manufacturer that had previously outsourced production to China and Mexico. The visit highlighted the firm’s decision to insource 100 jobs from China back to Wisconsin, whose manufacturing sector has lost more than 25,000 jobs (five percent) since Obama became President.
“After decades of watching American companies take jobs to other countries,” an Obama-administration blog post explains, “we’re beginning to see entrepreneurs and manufacturers make the decisions to keep factories and production facilities here in the United States—or even bring jobs back to the U.S. from overseas.”
Obama started 2012 by proposing tax incentives for companies that insource and the elimination of tax breaks for those who outsource. “We’re at a unique moment, an inflection point, a period where we’ve got the opportunity for those jobs to come back,” he said at a January 10 White House event. Obama noted that firms such as Ford and Lincolnton Furniture have also insourced jobs back to the United States (in Ohio and North Carolina, respectively). “In recent months,” the administration’s blog post explains, “large manufacturers like Ford and Caterpillar have announced large investments in U.S. facilities. In years past, these sorts of expansions have been aimed at facilities in Mexico, China, or Japan.”
Ford announced in late 2011 that a $128 million investment at a northeast Ohio plant will protect nearly 2,000 jobs while shifting truck production from Mexico. Two days after Obama visited Wisconsin, machine manufacturer Caterpillar announced it would shift some production from Japan, employing 1,400 workers in Georgia. The Obama administration notes insourcing is also occurring with smaller manufacturers: “In 2010, KEEN, the footwear designer, opened a 15,000-square-foot facility to manufacture boots in Portland, Oregon—moving production from China to a location just five miles from its corporate headquarters.” The firm also manufactures socks in North Carolina.
Any insourcing is better news than more job losses as the result of domestic plant closures. But the bottom line is that President Obama is still likely to be the first Democratic president since 1939, when monthly labor-market statistics were first recorded, to preside over a net loss in manufacturing employment. There were 690,000 fewer U.S. manufacturing jobs in January 2012 than three years earlier. Manufacturing would have to average 57,500 new jobs each month through next January for Obama to break even. But, as of this writing, the biggest one-month manufacturing gain of Obama’s term was 52,000 in January 2011, according to the U.S. Bureau of Labor Statistics. Domestic-manufacturing proponents recognize the sector’s importance to middle-class prosperity and national security and hope employment continues to grow, whichever political party resides in the White House. The long-term trend, however, dating to manufacturing employment’s peak under President Jimmy Carter (June 1979), is fewer jobs for American workers. Every administration since Carter’s has changed the topic by citing improved manufacturing productivity. Obama’s is no exception. Its press release states, “According to the Bureau of Labor Statistics, between 2002 and 2010, only one of 19 other industrialized countries managed to improve its unit labor cost position in manufacturing more than the United States.” Insourced jobs are returning because of American workers’ productivity, not because of foreign political instability.
Another explanation for the newfound interest in insourcing in 2012 is electoral politics. Most of the firms cited by President Obama and his administration have production facilities in swing states that are likely to determine the outcome of this year’s election. These states are Wisconsin (10 electoral votes), Ohio (18), and North Carolina (15). Add the manufacturing states of Michigan (16) and Indiana (11), and a candidate has more than one quarter of the 270 electoral votes needed to win the presidency. Americans will know the 2012 campaign is fully engaged if and when Republican governors in these states or the GOP presidential nominee lays claim to these job gains, as small as they are within the 11.8 million U.S. manufacturing workforce.