Date: 8/30/2012

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Crisis of Confidence: US Manufacturing at Crossroads




Many Americans view the US manufacturing sector as fragile and unstable, and for good reason. The sector has lost its global leadership position. A recent Deloitte LLP report, “Manufacturing Opportunity,” describes how America can regain its stature. The report includes five key recommendations. Craig Giffi, vice chairman and US consumer and industrial products leader at Deloitte LLP, authored the report and provides this eye-opening summary.

The truth hurts. In the past decade, America has lost six million manufacturing jobs. The US manufacturing sector has held less economic importance over the past several decades than it has at any time in our history. In fact, 65 years ago, 26 percent of nominal GDP came from manufacturing. Today, only 11 percent of our nation’s GDP comes from manufacturing. In 2010, China surpassed the US to become the world’s leading manufacturer. That trend continues.

It’s not all doom and gloom, however; there are pockets of optimism. Some manufacturers have begun to bring operations back from overseas due to rising wages in emerging economies and because it allows them to be more nimble in reacting to market demands. In fact, there are 600,000 manufacturing jobs waiting to be filled in America because manufacturers can’t find the right people with the right skills.

While policymakers routinely discuss the challenges facing our country’s manufacturing industry, most Americans don’t believe enough is being done to support it. Indeed, 80 percent of Americans think the US should invest more into manufacturing. Almost as many believe that a strong manufacturing base should be an absolute national priority.

Every challenge poses an opportunity; the time is right to help our country regain its global manufacturing lead. America can reverse the decline in the manufacturing industry by encouraging innovation, training workers, addressing tax reform and regulations and investing in infrastructure and energy. New pathways to manufacturing growth are both available and achievable if we get public policy leaders and candidates to address ways to support manufacturing – including refocusing on long-term opportunities and America’s ability to lead in the innovation, research and development of increasingly complex and emerging technologies.

Keys to Strengthening Competitiveness
Our team talked at great length with leaders from the business and academic communities as well as organized labor, and identified recommendations to help manufacturing regain its footing as the crucial catalyst it once was to improve the country’s health, economy and drive competitiveness. Our recommendations include:

  • Invest in Research and Development: For America to regain its position as a global leader in manufacturing and revive economic prosperity, it must invest in the research and development needed to produce the advanced technologies used in the manufacturing sector.

  • Train Tomorrow’s Workforce: Advanced training is required to meet the needs of manufacturing jobs. Today there are 600,000 jobs that cannot be filled in America because manufacturers cannot find workers with the right skills. A focus on performance-based education and fostering government-to-industry partnerships, among many other recommendations, can help better prepare new generations of workers.

  • Reform Taxes and Regulations: Numerous tax policies create a substantial burden for American manufacturers. In 2011, the United States had the highest corporate statutory tax rate among OECD (Organization for Economic Co-operation and Development) nations. It is the only G8 member that does not employ a territorial tax policy. Policymakers in Washington D.C. should address corporate tax reform and consider a tax system that positions US businesses to be more competitive globally.

  • Invest in Infrastructure: Investment in infrastructure is paramount to manufacturing growth. Every dollar of infrastructure spending generates an additional 60 cents in economic activity. China, for example, recently devoted nine percent of its GDP to infrastructure development, while the United States has let much of its infrastructure deteriorate. Improved infrastructure facilitates a healthy manufacturing sector.

  • Define a National Energy Policy: The definition of a national energy policy could ensure the reliability of fuel sources to power the manufacturing sector.

Low-cost, basic manufacturing is unlikely to ever recover its former importance in our economy. Our long-term opportunities lie in advanced technologies and America’s ability to lead in the innovation and R&D of such breakthroughs. Seizing these opportunities will require sustained commitments to rebuilding our education system and creating and cultivating an effective ecosystem of public-private research and product development.

Most Americans understand that our economic success is closely linked to our ability to make useful and valuable products. It’s up to our country’s leadership to regain our footing by supporting the recommendations outlined above, which can ultimately help the US fill 600,000 vacant jobs, recover its global lead in manufacturing and make responsible investments in innovation, talent and infrastructure.

“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.


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