You’ve no doubt heard of “out-sourcing” – the practice of American companies moving jobs overseas, often to save money on labor costs.
The flip side these days is “in-sourcing,” which is the growing trend of companies deciding it sometimes makes better business sense to bring jobs home.
Stressing the merits of in-sourcing is one reason why President Obama paid a visit Wednesday to Oak Creek’s Master Lock Co. Since mid-2010, Master Lock has bought back about 100 union jobs from China to its Milwaukee factory.
The president also mentioned Diamond Precision, a machine manufacturer that is expected to add dozens of jobs in Milwaukee, and Collaborative Consulting, an information technology company that plans to open a call center in Wausau. Both are companies that chose not to out-source jobs.
Obama wants to encourage other U.S. companies to do the same, and has proposed targeted tax incentives to help them do so.
While visiting Master Lock, Obama called for every multinational company to pay a basic minimum tax to ensure they do not benefit from moving jobs and profits overseas to avoid paying their fair share of taxes.
He also called for lowering the tax burden on manufacturers operating here, saying they should get aid to cover expenses for moving jobs back to the United States; that high-tech manufacturers should see their deduction double for making products here; and that those relocating to communities hard hit by factories leaving town should get financing for a new plant, equipment or training for new workers.
“It is time to stop rewarding companies that ship jobs overseas and start rewarding companies that are creating jobs right here in the United States of America,” Obama said.
Tax breaks alone won’t turn the tide of out-sourcing, however. There are many reasons why companies shift some jobs overseas. Often, it’s simply about being closer to emerging markets. If you’re selling refrigerators in China, for example, it might make more sense to build them there and avoid transportation costs.
Technology itself plays a role. While tech innovation has made businesses more efficient and productive, it has also made some jobs obsolete. In a world where the Internet is king, companies can set up shop just about anywhere so long as online connections are robust.
But as the wage gap closes and transportation costs from overseas back to the United States rise, out-sourcing is not the slam dunk it once was for American companies. Just like there are skilled labor shortages in the United States, the same can hold true overseas. American companies also worry about language barriers, security, quality of workmanship and other factors that can tip the balance between out-sourcing and bringing jobs home.
For in-sourcing to become more than a mini-trend, however, companies must know they can find skilled workers at home. That’s why many companies, Master Lock included, establish partnerships with trade schools, technical colleges and other institutions of higher learning.
Obama addressed the need for better trained workers when he reminded his Wisconsin audience that he’s asked Congress “to join me in a national commitment to train 2 million Americans with skills that will lead directly to a job. We need to give more community colleges the resources they need to become community career centers.”
Companies also want the emphasis of building basic skills – especially in science, technology, engineering and math – to seep down into high schools and middle schools. But that’s a longer-term project that must involve companies themselves, as well as educators and parents.
In-sourcing is a welcome trend. Just don’t expect a tidal wave of returning jobs based on tax breaks alone. Other business costs and the building the right labor force are just as essential to bringing American jobs home.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal.