As costs rise in developing countries, and automation eliminates the most mindless tasks, some manufacturing and service businesses are going home—but with greatly reduced labor needs.
A different equation pertains to reshoring decisions on white-collar work. Shipping is irrelevant when the product is database management or help-desk assistance. Wage growth has slowed with the growing supply of educated graduates in key outsource countries, says Michel Janssen, Dallas-based chief of research at consultant Everest Group. India’s university student population has more than doubled since 2008, to 25 million, dampening their elders’ pay demands. “We predicted that the labor arbitrage for service outsourcing would be finished by 2015–2020,” Janssen says. “Now we expect it to be there until 2040–2050.”