Talk about money: Outsourcing slowing, even in Scotts Valley

The outsourcing of U.S. jobs to cheaper overseas locations has been felt deeply in Scotts Valley in recent years, but that global trend is slowing down.
More companies that sell products in the U.S. are choosing to also make those products in the U.S. It’s still cheaper to manufacture in China than here, but the gap is narrowing, for several reasons:
– Wages in emerging economies have been rising as those economies boom. In China, wages jumped by 69 percent between 2005 and 2010, according to The Economist magazine, and are expected to keep rising by 17 percent a year. Meanwhile, wages in the U.S. have stagnated along with the U.S. economy. In negotiations with automakers this summer, the United Autoworkers’ union is focusing less on pay raises and more on keeping jobs in the U.S. and bringing back jobs that were outsourced overseas.
– The cost of transporting products from faraway factories has risen as energy costs have soared.
– The tsunami that devastated Japan in March and other natural disasters elsewhere have convinced companies to simplify supply chains. It’s safer to make products closer to where they will be sold.
Among the companies moving jobs back to the U.S.: Earth-moving equipment maker Caterpillar is shifting some of its excavator production from abroad to Texas; NCR is returning production of cash machines to the state of Georgia; and Wham-O restored half of its Frisbee and Hula Hoop production to the U.S. from China and Mexico.
“Sometime around 2015, manufacturers will be indifferent between locating in America or China” to produce items that will be consumed in the U.S., said Hal Sirkin, a Boston consultant quoted in The Economist.
That’s good news for Scotts Valley, which was hit hard by the loss of major employers Borland, Aviza and Seagate.
The jobs picture here brightened recently with the news that Bay Photo is buying the 17 acres vacated by Seagate on Disc Drive and will move its headquarters there, along with 200 employees.
Scotts Valley might not be the cheapest place to employ people, but we are blessed with beautiful surroundings, a near-perfect climate and an abundance of skilled workers.
One of the city’s major employers is Threshold Enterprises, a wholesale distributor of dietary supplements, with 600 employees in Santa Cruz County, including 400 at its Scotts Valley headquarters on Janis Way.
Threshold moved to Scotts Valley from Santa Cruz in 1984 and has stayed here while other companies moved jobs to cheaper places. The outsourcing trend is losing steam now, but Threshold never planned to leave the area anyway.
“We plan to stay here,” said Daphne Gulling, director of human resources. “We are continuing to grow rapidly and are currently recruiting for a number of positions.”
Better prospects for job hunters is also evident in numbers reported by the U.S. Bureau of Labor Statistics, which shows that the unemployment rate in Santa Cruz County has improved in the past year and a half from 15.5 percent to 11.4 percent.
After years of negative news on employment, it’s nice to see signs that the jobs picture is improving.
Mark Rosenberg is an investment consultant for Financial West Group in Scotts Valley, a member of FINRA and SIPC. He can be reached at 439-9910 or [email protected].