US and China to have manufacturing costs parity by 2015?

Paul Raven @ 09-05-2011

I’m going to offer this with a large pinch of salt, given that it’s a press release from a consulting firm, but the boldness of the claim is pretty impressive [via NextBigFuture]:

Within the next five years, the United States is expected to experience a manufacturing renaissance as the wage gap with China shrinks and certain U.S. states become some of the cheapest locations for manufacturing in the developed world, according to a new analysis by The Boston Consulting Group (BCG).


After adjustments are made to account for American workers’ relatively higher productivity, wage rates in Chinese cities such as Shanghai and Tianjin are expected to be about only 30 percent cheaper than rates in low-cost U.S. states. And since wage rates account for 20 to 30 percent of a product’s total cost, manufacturing in China will be only 10 to 15 percent cheaper than in the U.S.—even before inventory and shipping costs are considered. After those costs are factored in, the total cost advantage will drop to single digits or be erased entirely, Sirkin said.

Products that require less labor and are churned out in modest volumes, such as household appliances and construction equipment, are most likely to shift to U.S. production. Goods that are labor-intensive and produced in high volumes, such as textiles, apparel, and TVs, will likely continue to be made overseas.

Talk about a mixed bag of news. The prospect of working-class jobs returning to American shores must be something of a relief, but implicit in that return is the socioeconomic status of those “certain U.S. states” (and I think we can all guess which ones) as equivalent with China, the great economic enemy and exemplar of all things unAmerican. And it puts the lie to the notion of the unity of the US, too; sure, the top 1% of the country is rolling in money, but the bottom layer of the population pyramid is competing with China for the chance to make tchotchkes. Kinda puts the whole “USA! USA!” chanting from last week into perspective, doesn’t it? If this is a victory condition, I’d hate to be losing the game. (Note use of sarcasm as a way to blunt the pain; things over here on Airstrip One are looking grimmer by the day, too.)

Also implicit in the consultant’s outlook there is that the methodology of manufacture will remain essentially the same. Four years doesn’t look like a long time, but things move fast these days, and the 3D printing and fabbing industry is edging closer and closer to the point where it becomes a big grenade in the labour punchbowl. Still, I guess someone’s gonna have to make the 3d printers… up until the point where they can reliably self-replicate, anyway. (Shorter version: economics of mass production looking pretty screwed in the long term with respect to job creation. Profitability looking much better, but the 0.01% of the population who’ll benefit from it don’t need me to tell them that, I expect.)