CLEVELAND, Ohio—According to a recent blog post from the Reshoring Initiative, 3 to 5 million manufacturing jobs have been lost to trade/offshoring since 1979. Similarly, 3 to 5 million can be brought back by reshoring.
These conclusions are consistently found by serious researchers on the subject. Inaccurate calculations suggesting the numbers are much smaller have been widely circulated and need to be clearly and soundly refuted. Understating the job losses and potential for reshoring undermines the priority that needs to be placed on making US manufacturing competitive.
The clear, direct means of analysis is via the change in the trade balance. The US trade balance went negative in 1979 and has been negative every year since. The deficit in goods, excluding petroleum, currently averages about $500 billion per year. Import prices are, on average, about 20 percent lower than domestic prices. Thus, the trade deficit, measured at US price levels, is about $600 billion.
The 2016 average output per US manufacturing employee was $179,000. Therefore, the number of manufacturing jobs lost, measured at the current level of US productivity, is 3.35 million. Eliminating the trade deficit by substituting domestic production for imports (reshoring) or exporting more will bring back 3.35 million jobs at current levels of productivity. If productivity rises, the number brought back will be proportionately less. Productivity is rising slowly, however, at about 2 percent per year. The trade surplus in services reduces the overall trade deficit. Basing the job loss solely on the 2016 manufactured goods trade deficit, excluding petroleum, of $683 billion, the loss rises to 4.6 million manufacturing jobs.