Is It Better to Outsource or Insource T-shirts?

Manufacturing Matters in the US

Dec 10, 2012 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Thinkers, Gender gap, Households, Innovation, International Trade and Finance, Labor, Macroeconomic Measurement, Regulation, Uncategorized • 134 Views    No Comments

Hearing about an apparel firm that “insourced,” I confess I was not as enthusiastic as the report.

The firm, American Giant, had just enjoyed a run on their hoodies. As a Made in the USA producer, they have the caché of a San Francisco factory. Proclaiming better grommets, eaglets, drawstrings and zippers and a designer previously employed by Apple, American Giant says their quality is far better than their Asian competitors.

Looking at the NPR facts and other similar articles, I wondered whether making t-shirts and sweatshirts in the US was so beneficial. Yes, they were taking advantage of US expertise, eliminating middle people and selling directly online to consumers to cut costs. However, should we applaud making apparel here?

That took me to a Brookings Report that appeared to be on target. They asked “Why Does Manufacturing Matter? Which Manufacturing Matters?” And no, it is not in the apparel industry.

The Brookings report emphasized that manufacturing provides:

  • high wage jobs
  • innovation
  • exports
  • environmental sustainability

 

But not all manufacturing. The industries that reap the largest gains are:

  • computers and electronics
  • chemicals (including pharmaceuticals)
  • transportation equipment (including autos, auto parts and aerospace)
  • machinery

Our bottom line? Hoping to encourage global trade, economist David Ricardo (1772-1823) said each nation should produce the goods and services for which it has a comparative advantage because then, that nation sacrifices less in order to produce more.

Sources and Resources: You might want to look at the Brookings report here. 53 pages long, it has lots more detail. Meanwhile, the American Giant stories at Slate and NPR sounded more like commercials for the firm than news reports. Finally, at econlife, whenever we talk about manufacturing, I always recommend The Travels of a T-Shirt in the Global Economy, a wonderful narrative describing the multinational origins of the typical t-shirt.

From the Brookings Report on manufacturing, the following graphs illustrate their conclusion that manufacturing should be supported by public policy.

Typical Manufacturing Workers Earn More.

 

Most R&D Originates in Manufacturing

Losses and Wages in Manufacturing Jobs, 2001-2009

Related Posts

« »