As the labor costs and currency strength in China rise and U.S. energy costs drop, companies are reshoring their manufacturing jobs to the U.S. But how does it affect our job market?Economic development is not a zero-sum game. So when I first heard that the United States is “bringing manufacturing jobs back from China,” I started to research on the concept and practice of “reshoring” to find out its impact on the U.S. job market and economy.Between 1998 and 2010, the United States lost 35 percent of its manufacturing jobs, but the Reshoring Initiative estimates that out of the 568,000 factory jobs that the United States has regained since 2010, around 15 percent of them come from reshoring and the number is still growing. So what is driving this promising if modest trend?

Profit and Practicality

Chinese firms are starting to realize the importance of human resources and higher pay and better career opportunities are on the rise. According to the Economist, hourly manufacturing wages in China have risen by an average of 12% a year since 2001.Meanwhile in the United States, currency exchange rate and labor costs have dropped since the 2008 financial crisis. Fracking also has driven down fuel and production costs. According to the Washington Post, manufacturing labor costs in China will come very close to U.S. costs, reducing the gap from $17 to $7 by 2015.While profit maximization is the reason U.S. companies reshore, most people care more about its impact on job creation. After all, isn’t the whole point to regain our lost jobs since the outsourcing tide?

A Corporate Example

Home appliances company Whirlpool Corp. in 2011 reshored the production of its KitchenAid hand mixers from Huizhou, China. Whirlpool was struggling to maintain its U.S. operation, “most of the parts for the mixers — including the motors — are still made in China because Whirlpool couldn’t find U.S. suppliers that would make them cheaply enough,” reports the Wall Street Journal. As a result, Whirlpool cut costs by replacing workers with more machines imported from China. While companies like Whirlpool shrink the job posts from China and replaces them with machineries to remain competitive, others are more assured about creating jobs in the U.S. because of its promising domestic market.The impact investment foundation I used to work for invests in a company called Ecologic Brands, which is a manufacturer of sustainable packaging for use with consumer packaged goods. Ecologic Brands is a perfect example of a promising reshorer, because on one hand, sustainable packaging is a 110 billion dollar industry and is growing four times faster than the overall 500 billion dollar industry.On the other hand, as the first mover in a new domestic market for molded fiber, Ecologic hires its employees over the next five years to equip them with skills that likely will preserve their long-term employment. Repatriated jobs from Taiwan, the company aims to adapt an existing plant into a factory with custom machinery, where it’s expected to create 138 new manufacturing jobs in Manteca, California, a community with an unemployment rate significantly higher than the national average.

Bottom Line

The numbers may not sound impressive, but reshoring’s impact on job market isn’t direct and it doesn’t need to be. Because of technological advancement, companies follow the natural course of simplifying human labor with innovative equipment and data. This process of replacing person with machine to increase production and efficiency is simply inevitable. But as these companies move their production back to the U.S., they bring back not just jobs, albeit minimal, but also the ability to manufacture. This regained ability closely ties to a country’s ability to innovate. In other words, many companies fail to realize the quick cost cut that offshoring offers leads to a disconnection from the capacity for future innovation and sustainable growth.That’s why although it’s not for companies of all sizes and industries, reshoring as a surging trend will still benefit the general economy in the U.S. by bringing back the manufacturing and innovative capacity that we used to have.

Author’s Note:I’d love to hear feedback from you regarding the reshoring phenomenon as well as Chinese economy as a whole.