Can manufacturing revitalize your community?

One of the U.S.’s defining features of the past century was its strong middle class and the suburbs they lived in. Manufacturing was the backbone of many of these thriving economies, but the concerted movement toward industrial outsourcing throughout the ‘90s and 2000s significantly affected these prospering towns throughout the nation’s heartland. The signing of the North American Free Trade Agreement (NAFTA) coincided with a 29% drop in manufacturing employment, and the number of Americans working in manufacturing has declined by 37% since its peak in 1979, creating an economic challenge for towns that once relied largely on the manufacturing industry.

Now, the reshoring and nearshoring movement to bring production and sourcing closer to home has gained new momentum in the wake of COVID-19 and the resulting global supply chain disruption. Some experts estimate that as many as 300,000 jobs per year could return stateside. Reshoring manufacturing operations can simultaneously alleviate supply chain woes and revitalize the factory towns abandoned by outsourcing.

The state of America’s heartland

Since the exodus of manufacturing and blue-collar jobs, towns and cities across the country and specifically the Rust Belt have been hit with landscape changes. Once-thriving downtowns and Main Streets are now full of vacant buildings with few dining and shopping opportunities. 

As a result, communities have lost their identities, with manufacturing and landmarks disappearing along with job prospects and opportunities. Manufacturing towns across the country are in need of help, skilled labor, and reinvestment.

The promise of reshoring manufacturing

Fortunately, reshoring and nearshoring operations are underway, with increasing efforts. UBS observed that 70% of U.S. manufacturing executives surveyed are now intending to move at least some part of their supply chain closer to their market. As opportunities return to abandoned towns in the Rust Belt, the region could go beyond revitalization and see a complete transformation. Experts are expecting:

• Downtown restoration. The influx of blue-collar jobs from more domestic sourcing and production demands would bring back above-average and stable wages to neglected areas, allowing workers to not only replenish savings, but also spend more on a regular basis. In addition to long-abandoned factories coming back to life, increased spending could bring about a surge of new businesses in the area, like restaurants and stores.
• A diversified industrial sector. As domestic manufacturing returns, the businesses in operation will have opportunities to diversify their offerings to meet demand, as will all the other businesses that service those manufacturers, including suppliers and small job shops. Best of all, the less reliant communities are on a single industry, the more resilient they can be to economic downturn, ensuring that revitalization remains a permanent fixture.
• More tax revenue. More people earning wages and generating economic activity doesn’t just improve quality of life — it can also replenish coffers for local governments through taxes. Every commercial transaction comes with a sales tax while rising property values generate higher property taxes, all of which officials can direct toward education, municipal services, and other community projects.
• Infrastructure investment. To support increased demand for manufacturing, cities also need updated and well-maintained infrastructure, including transportation, utilities, and industrial facilities. Potholes in roads, old water pipes, and other structural problems plaguing residents will finally have an incentive for repair. And with so much economic activity on the horizon, the city will also have the resources to pay for this uptick in infrastructure investment.

Manufacturing is returning to the U.S. and has the opportunity to start a new chapter for the nation. The link between a strong manufacturing base, supply chain security, higher standards of living, and economic prosperity are now crystal clear, but it’s not enough to rely on market forces and hope for the best.

Stakeholders, including manufacturing companies, local governments, and federal agencies, must play an active role in incentivizing more reshoring efforts and promoting trade education to build a strong workforce. Outsourcing has hollowed out the American heartland for decades, but with the right mix of regulations, investment, and education, we can turn the situation around in a fraction of the time it took to create these problems.