Tomorrow is the first national Manufacturing Day, reminding us that the United States still leads the world in production of manufactured goods and that the manufacturing sector is at the core of our economy.
Manufacturing is coming back from the recession. It may also be coming back from overseas. The 2012 U.S. Re-shoring Survey by the MIT Forum for Supply Chain Innovation finds that manufacturers are reconsidering their supply chain strategies due to higher labor costs in developing countries, energy costs, political stability issues, and time-to-market concerns.
The survey finds that re-shoring – bringing manufacturing back to the U.S. from overseas facilities – is under consideration by a significant number of firms. Others, including auto parts and electrical equipment manufacturers, have already moved operations back. Federal and state policies, including corporate tax rates, have a major impact on decisions to move or stay.
Here in Massachusetts, “manufacturing is alive and well, and has a healthy future,” according to a recent report entitled Staying Power II: A Report Card on Manufacturing in Massachusetts, by Professor Barry Bluestone and his team at Northeastern University.
Some key findings of the report about Massachusetts manufacturing today:
- Manufacturing employment has stabilized after a sharp decline during the recession;
- Manufacturing is the state’s six-largest employment sector – and the second-largest (after health care) in terms of payroll;
- Manufacturing’s share of gross state product has risen for the past two years, to 12.2 percent;
- The number of manufacturing firms increased in 2011 for the first time in decades;
- Manufacturing is more technologically intense than ever; in 1970 employment in low-tech sectors was twice that in high-tech; in 2006 they were equal, and by 2010 high-tech was 27 percent larger;
- Most Massachusetts manufacturing companies are small and family-owned;
- The manufacturing workforce is more diverse than the overall state workforce; and
- Although most jobs in manufacturing are now “white collar,” only about one position in five requires a college degree
While cost issues and global competition are challenges, the study finds, the skills and work ethic of the state’s workforce are powerful reasons to stay in Massachusetts. But employers are already experiencing difficulty in hiring skilled workers, and an upcoming wave of retirements will create up to 100,000 job vacancies over the next ten years. The 70 percent of manufacturing firms foreseeing expansion of employment over the next five years must face up to this “recruitment challenge” by focusing on workforce development and promoting manufacturing careers.
In this election year, candidates across the country, from President Obama and Governor Romney on down, have jumped onto the manufacturing bandwagon. Beacon Hill has cut the corporate excise tax, passed bills to control medical and energy costs, strengthened the Workforce Training Fund Program and community colleges, and created the industry-led Massachusetts Advanced Manufacturing Collaborative. Nationally, however, the reality has been partisan deadlock.
If Congress really cares about manufacturing, there are issues that demand immediate action. Most urgent is heading off about $500 billion in tax increases that will hit the U.S. economy on January 1, along with huge automatic spending cuts. The top tax rate on dividends will almost triple, the top tax rate on capital gains will increase by more than half, and many small and mid-size manufacturers will see their top marginal tax rate rise, because nearly 70 percent of manufacturers file taxes at individual rates. The Research and Development tax credit expired for the fifteenth time at the end of 2011. And the U.S. corporate tax rate is the highest in the developed world. Action in other areas is equally vital, if less pressing. For example, the future of workforce development programs, largely shaped by federal policy, remains up in the air.
America’s manufacturing sector, historically the backbone of our economy and of upward mobility in our society, is entering a period of renewed opportunity. We need congressional action, now, to ensure that future expansion takes place here rather that abroad.