Inflation’s Silver Lining

Mar 7, 2022 | Mid-Point

The Mid-Point by One America Works

Despite claims that the supply chain crisis is beginning to ease, in reality the issue is far from resolved. Prices of goods are rising to compensate for shipping and manufacturing costs, and supply chains are constantly being disrupted. 

Because of the nature of their operations, a hold-up at a single point along the chain has profound impacts. For instance, the recent surge in COVID-19 cases following the introduction of the omicron variant created labor shortages and lockdowns that slowed production and transportation far down the line. Continued threats to already struggling supply chains mean it’s essential that we re-engineer away from a tightly interconnected system.

Almost 90% of supply chain leaders in a McKinsey survey expect to pursue some sort of regionalization over the next three years, with plans to move factories closer to customers. Peter Colson, assistant economist at Oxford Economics, says “the tables have turned.” U.S. manufacturers have less of a desire to shift production to China, and reshoring is starting to gain momentum. 

The trend of job relocation back to richer home economies is driven by a number of factors. These include rising shipping costs, proximity to customers, rising government incentives and a desire to protect brand image. As reshoring creates more U.S. jobs, local governments should see a silver lining amidst the shortages that contributed to a slowdown in the global economy. Small towns across the country are advertising themselves as potential manufacturing locations in a race to claim their piece of the potential boom.

Offshoring and monopolistic profit-taking have driven inflation, but reshoring manufacturing and re-regulating the price-gougers can beat it back. We built this system, and we have the power to fix it. Read more in this edition of The Mid-Point.

Inside this issue

  • Re-Engineering Our Supply Chains
  • Build Back Better Bill Would Change Overseas Tax Provisions
  • Is Onshoring the New Offshoring?
  • Offshoring Slows as Wages Rise in Some Emerging Economies
  • Job Alert! News From Our Partners at Purpose Jobs

Supply chain disruptions will continue to happen both more frequently, and with potentially larger magnitude. We can solve that only by rebuilding redundancy and resiliency. That means viewing the system as an engineer would, redesigning it for sustainability and strength rather than profit. The economy has not overheated; a few oligarchs got their hands on the supply chain and drove it into a ditch. It’s time for a coherent national logistics system, regulating and coordinating what has been privatized. Read More

As a presidential candidate, Joe Biden promised to change the tax code in ways that would penalize “offshoring,” or having U.S. companies set up facilities overseas in a way that avoids paying taxes. After taking office, Biden proposed several tax changes that could affect this process. He is announcing that he will impose a Biden Offshoring Tax Penalty, specifically aimed at those who offshore manufacturing and service jobs to foreign nations in order to sell goods or provide services back to the American market. Read More

The current geopolitical climate is causing companies to reconsider their offshoring strategies. Recently, the direct costs of manufacturing in Asia have steadily been increasing. It is not uncommon for workers to demand pay increases in excess of 30%, not just annually, but multiple times a year. The indirect costs, those associated with manufacturing added to the component and labor elements, have also been rising at a much faster pace. Gavin Smith, Head of Manufacturing at Plextek, looks at the trend to ‘manufacturing from home’ and asks if it provides more security in the supply chain. Read More

Back in 2010, a company could employ 8.3 Chinese manufacturing workers for the same price as one American worker. By 2018, the figure had plummeted to just 2.9, according to calculations based on the two countries’ statistical bureaux. Given this trend, it is unsurprising that the offshoring of jobs from high-wage countries to what were far cheaper emerging economies is no longer the contentious political issue it once was. Maybe now the new trend is offshoring from higher-wage emerging markets to lower-wage ones. Read More

News From Our Partners

Job Alert! Our friends at Purpose Jobs are hosting a career fair next month as part of South By Southwest! If you’re looking to connect with top startup and tech employers, join the virtual career fair on March 15th, 1 – 4 PM (ET). At the SXSW Virtual Career Fair, presented by Midwest House and Purpose Jobs, you’ll be able to:

🚀 Connect with purpose-driven tech orgs

🚀 Chat directly with hiring managers

🚀 Easily apply for jobs

It’ll be a great way to chat directly with hiring managers, apply for jobs, and be a part of one of the biggest festivals in the country without having to leave your house. Learn more and register here.

Upcoming OAW Events

On October 19, investors, founders and economic development leaders will convene in Columbus, Ohio for the “Connecting the Coasts to the Heartland Conference." This full-day event will feature expert panelists in the tech space and a competitive pitch opportunity for founders to connect with investors.

In addition to the 100+ confirmed investor attendees, the conference will feature over 100 tech founders from a variety of states, including Illinois, Iowa, Kentucky, Michigan, Missouri, Nebraska, New York, Ohio, Pennsylvania, and South Carolina.

Join us at this exciting event to see for yourself how and why the Silicon Heartland is emerging as a Midwest tech center. RSVP Here

One America Works is

a non-profit building a vision of the future where high-growth technology companies find the talent they need to grow and succeed in cities across America. Want to know more? Reach out to us at hello@oneamericaworks.org.