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A Manufacturing Opportunity

Wed, 09/12/2012 - 5:30pm

This article first appeared in IMPO's September 2012 issue.

Craig Giffi, Vice Chairman, Deloitte LLP and author of the latest report in this series, outlines pathways to manufacturing development in the U.S.

Manufactur opportunity in the U.S.American manufacturing is a world of paradoxes. In the past decade, America has lost 6 million manufacturing jobs; yet today, 600,000 jobs can’t be filled in America because manufacturers can’t find people with the right skills.

When Americans are asked how they would create a thousand new jobs in their communities with a new business facility, manufacturing is their first choice. Yet 18- to 24-year-olds rank manufacturing dead last among industries in which they would actually choose to start a career.

Similarly, 79 percent of Americans believe a strong manufacturing base should be a national priority. However, when it comes to the future of manufacturing, Americans are very pessimistic: Only 7 percent believe that U.S. manufacturing competitiveness is likely to get stronger, while 55 percent say it will become weaker.

In short, manufacturing is experiencing a crisis in confidence in the United States. Americans view the manufacturing sector as fragile and unstable. They are concerned about the long-term stability of manufacturing employment. They also fear that manufacturing jobs will inevitably be moved to workers in other countries, and they appear to have doubts about our leaders’ ability to prevent this. These views have remained consistent year after year.

The United States is at a crossroads. Low-cost basic manufacturing is unlikely to ever recover its former importance in our economy. However, this doesn’t mean further decline is inevitable. New pathways to manufacturing opportunity in America are both available and achievable. And public policy has a major role to play in supporting these directions.

The first pathway lies in advanced technologies and innovation. If America is to regain its position as a global leader in manufacturing and revive economic prosperity, we must look to increasingly complex and emerging technologies, and to America’s ability to lead the development of such breakthroughs.

Across the spectrum of policy, from the tax code to the direct incubation of small businesses, government policy can either help spur — or inhibit — more innovation. A healthy manufacturing base drives emerging technology development and will help propel the United States into the future. Strengthening manufacturing today will play an integral part in determining where America will be technologically in 20 years. Government could help establish consortiums between businesses, universities, and labor and political leaders to develop long-term U.S. manufacturing goals and form a new innovation strategy.

The second pathway is enhancing talent. CEOs agree that talent trumps all other factors gauging manufacturing competitiveness. In fact, 67 percent of manufacturers reported that moderate to severe shortages of available, qualified workers exist. And 56 percent anticipate that these shortages will only grow worse in the next three to five years. The workers hardest to find are machinists, operators, craft workers, and technicians. There are numerous ways to center policy on enhancing skills to meet today’s advanced manufacturing needs.

A focus on performance-based education and building government-to-industry partnerships among many other recommendations can help prepare talent better. As a country, we need to arm students with the right technical and problem-solving skills through flexible education pathways that lead to advanced degrees or certifications.

The third pathway to greater competitiveness is to reform taxes and regulations. For example, 69 percent of Americans agree that tax cuts for businesses and individuals create jobs, while 65 percent support tax incentives for manufacturing. In 2011, the United States had the highest corporate tax rate among OECD nations. And the United States is the only G8 member that does not employ a territorial tax policy, which taxes only income earned inside the nation’s borders.

Improvements in intellectual property reform are also needed. Our report’s recommendations, if implemented, would make it more attractive for manufacturers to improve and increase their activities in the United States.

Fourth, the need to invest in infrastructure development is paramount. Every dollar of infrastructure spending generates an additional 60 cents in economic activity. China, for example, recently devoted 9 percent of its GDP to infrastructure development, while the United States has let much of its infrastructure deteriorate.

Lastly is the issue of America’s energy policy and its impact on manufacturing. Competitive energy policies could ensure reliable energy supplies to literally fuel manufacturing. In short, while policymakers mention manufacturing all the time, most Americans don’t believe enough is being done to support it. Eighty percent of Americans think that the United States should invest more into manufacturing. Why? The linkage between manufacturing capabilities and economic prosperity is a much stronger predictor of a vibrant, successful, and growing economy than any other measure typically used by economists.

Simply put: manufacturing matters. The latest report from Deloitte looks at the manufacturing sector and the challenges it faces. It proposes a series of recommendations that, if implemented, would help the United States climb back into the driver’s seat in global manufacturing competitiveness. “Manufacturing Opportunity” states that new pathways to manufacturing growth are both available and achievable. It also outlines several recommendations compiled directly from input received during extensive interviews with leaders from the business and academic communities, as well as organized labor.

“Manufacturing Opportunity” is the third in a series of Deloitte studies to be published before the 2012 election. Visit www.deloitte.com/us/leadstrong for research-based, non-partisan insights for public and private sector leaders on these and related issues. To download a copy of the full report, visit www.deloitte.com/us/manufacturingopportunity. *As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries.

About the Deloitte series on making America stronger: In a year of intense debate, the nation’s government and business leaders seek to cut through the noise in search of fresh perspectives and leading practices to foster innovation, performance, and growth. Deloitte is proud to contribute to the national dialogue and provide research-based, nonpartisan insights to help leaders make a real, lasting impact on issues that matter to all of us. For more on this, visit www.deloitte.com/us/leadstrong.

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