The monthly Industrial Heating Equipment Association (IHEA) Executive Economic Summary released in November takes a look at high inflation. The report focuses the reasons for current inflation on four factors: supply chain issues, oil crises stemming from Ukraine situation, increase in wages, and possibility of bringing jobs back to American soil.
The IHEA report hones in on good and bad news related to wages and reshoring of jobs. Thirty or forty years ago, moving production overseas meant that U.S. employers could spend very little on wages. What's happening now is China and other players are seeking to have domestically independent economies, which means paying their own employees higher wages. The report states, "The China under Xi Jinping seeks to be far less dependent on its export economy and wants to be driven by its own consumers. For that to happen the Chinese consumer needs more money and that means higher wages. The bargain that was Chinese production has faded." So the bad news for manufacturers is that wages are high everywhere. The good news is that this helps bring the jobs back to North America.
There is good and bad for reshoring the jobs back to America. The report states, "If they [American companies] produce close to the consumer, they can be more adaptable . . . . The ability to take advantage of U.S. innovation and development improves. This all comes at a cost as well – higher wages, higher regulatory costs and higher taxes." It seems that America has been caught off guard. Bringing jobs back to America, in a time when preparations have not been implemented, means growing pains. The pressure is on to find workers, train workers, and keep current and new workers happy.
Check out the full report to see specific index growth and analysis which is available to IHEA member companies. For membership information, and a full copy of the 11-page report, contact Anne Goyer, executive director of the Industrial Heating Equipment Association (IHEA). Email Anne by clicking here.
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