The Economy & You #51: Strengthening the American Economy
In a previous article, I wrote about keys to making America competitive with regards to manufacturing. The study was conducted by Deloitte and the U.S. Council on Competitiveness. The study identified specific areas in which policy makers and business leaders should focus their efforts. These areas include talent, innovation, energy, and government policy. The study went beyond just identifying these areas and brought forward recommendations to address such areas.
In developing recommendations, the opinions of chief executive officers (CEOs), university presidents, labor union leaders and leaders of national laboratories were sought. Deloitte conducted one-on-one interviews to help form specific action items.
The dominant concern expressed by executives and leaders was policy, legislative, regulatory uncertainty. The uncertainty they described affects short-term and long-term decision making. Business leaders offer that business plans often require ten to fifteen years timelines as the investments needed require a longer time horizon. Unfortunately, government policies do not provide similar certainty or clarity in the long-term. This uncertainty affects decisions regarding capital investment and research and development decisions.
From an education and training perspective, manufacturing CEOs are in agreement that worker talent, especially with regards to innovation, is the primary determinant in measuring competitiveness. Still, manufacturers report moderate to severe shortages of qualified workers and the problem is seen to grow worse in the next three to five years. Machinists, operators, and technicians are seen as particularly in demand and this demand will only increase as experienced employees retire without replacement at the ready.
Instruction in the science, technology, engineering and mathematics (STEM) areas was also identified as a concern. As teacher education has shifted from the teaching of specific subjects to the theory of teaching itself, and nearly a third of graduates in STEM subjects select careers in business rather than science and engineering, manufacturing competitiveness can only be improved if education focusses on the teaching of these subject areas and attractiveness of manufacturing careers.
Manufacturing plays an essential part of continued innovation. While there is a great concern about the amount of goods made IN China, there is little concern raised about the amount of goods made BY China. This is because the United States is still seen as the epicenter of innovation. Still, we must be wary. The transfer of production from the U.S. to other countries can limit opportunities to improve and innovate. As an example, the shifting of the production of televisions to Asia prevented our ability to develop the next generation of flat panel screens which also affected our ability to design and manufacture solar panels. This is an example of why where something is made matters.
Clean, reliable energy is an important factor in manufacturing. An energy demand increases globally, efficiency efforts and use of alternative energy sources will help to ensure a competitive advantage for any economy that can effectively develop them. In addition, alternative energy production has resulted in the creation of additional manufacturing jobs. Energy policies must incorporate these new alternatives along with traditional energy sources to provide power that is critical to our nation’s manufacturing sector.
Government policy plays a significant role in current state of our economy and, with careful planning, can broaden and strengthen our economy in the future. Political leaders must work together to find the right combination of tax, trade, and regulatory policy that will support and expand our manufacturing industries. Tax policy, regulatory compliance costs and protection of intellectual property will affect our ability to compete in the global marketplace.
There is a great deal of discussion regarding tax rates and their effect on American manufacturers. The U.S. has the highest corporate tax rate on all developed nations and proponents of reducing tax rates argue that the higher tax rates prevent manufacturers from investing in needed capital projects.
Stronger enforcement of international trade agreements is an issue of agreement between business and labor leaders. Whether protecting intellectual property rights (including trademarks and patents) or ensuring that all nations adhere to laws regarding child labor, workplace safety and environmental protections, Labor and business stand together that allowing such items to go unenforced is detrimental to our nation’s manufacturing economy. Regardless of the “fair trade vs. free trade” argument, there exist issues of unanimity that the United States can promote to the benefit of business and worker alike.
Low-cost, low-skill manufacturing is unlikely to ever return to the importance it once held in the American economy. Our fortunes lie in complex and highly skilled manufacturing sectors and emerging technologies. America’s ability to innovate and take advantage of our ability development of such breakthrough is what I believe will help to return our manufacturing sector to its former prominence. To do this, we must address those critical areas of talent, innovation, energy, and government policy to return America as the manufacturer of products as well as ideas.
- The Economy & You #47: The Manufacturing Paradox (wistatetreasury.wordpress.com)
- The Economy & You #49: Elements of Manufacturing Competitiveness (wistatetreasury.wordpress.com)
- The Economy & You #42: The Future of the U.S. Economy – My view (Part II) (wistatetreasury.wordpress.com)
- The Return to U.S. Manufacturing (annuityrateshopper.com)
- Manufacturing ‘renaissance’ takes shape in Mass. (bostonherald.com)