How Will Re-Shoring Increase Contractor Demand?

(Editor’s Note: This is the next in a series of guest blog posts about contract staffing, courtesy of Top Echelon Contracting, the recruiter’s back-office solution.  Similar posts will appear in future issues of The Pinnacle Newsletter Blog.)

For at least the past decade, Americans have been lamenting the loss of jobs to countries overseas.  Everything from call centers to manufacturing operations has been shipped to countries with lower wages and fewer government regulations.

Now it appears that some of those jobs may be coming back home.  A new trend is emerging known as “re-shoring,” which refers to companies that previously off-shored functions bringing those functions back to the United States.  A recent Workforce article points to Apple as an example.

The technology leader, known for making products in China, recently announced that it would be manufacturing some computers in the United States.  While experts don’t expect offshoring to disappear, the Workforce article notes a gradual movement toward bringing work back to the United States, driven by the following factors:

1. Eroding Cost Savings.  As wages and benefits costs increase in China, the amount companies can save by offshoring is decreasing and could go down to single digit percentages for many products.
2. Social Responsibility.  The slow economic recovery has made some successful companies feel responsible for creating jobs at home.
3. Value of Proximity.  Companies are starting to realize the advantages of having team members close together.  For instance, one hotel group interviewed for the article said that having developers located near the company’s business partners is essential for strategic tasks, such as rebuilding the website.
4. U.S.-specific skills.  Some skills are difficult to find overseas.  One example is app development for mobile devices.  U.S. coders are more familiar with writing those apps, so most app development is done with American talent.

Obviously, re-shoring is good for the American workforce . . . and recruiters.  But there’s a catch.  Many of these jobs are going to be filled by contractors.  Companies are still looking to keep their labor costs down.  Contractors help them do that because they are employed by a third party (“back-office”) that pays the employer portion of benefits premiums.  The back-office also takes on the administrative costs and burdens associated with payroll, Workers’ Compensation, Unemployment, employee paperwork and issues, and more.

North Canton, Ohio-based recruiter Mike Aquino told Top Echelon Contracting that a number of companies he’s worked with at his firm, MPA Companies, are bringing work back from overseas due to quality.

“They sent the work overseas because it was cheaper, but quality was horrible and they lost money because it held up production,” Aquino said.  “They’ve decided to bite the bullet and pay more to get it done right in the United States.”

But companies are having trouble finding the skilled workers they need nearby.  That’s where contracting comes in.  Workers from other areas who may be reluctant to relocate may consider moving on a temporary basis to take a contract assignment.  For example, Aquino recently received a call from a client in Texas looking for contractors from Ohio.

Only time will tell how big re-shoring will really be, but it’s obvious that it has already had some impact and that recruiters who can place contractors could especially benefit from this trend.

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