Cam Mackey will be the first to admit that few of his organization’s members are in the insurance or medical device-making industries, and most employ more than 500 people.
But according to a recent analysis, they’re still concerned – gravely concerned, actually – about the immediate and long-term implications of the slowly-being-implemented federal Affordable Care Act.
Mackey is vice president and survey coordinator at the Manufacturers Alliance for Productivity and Innovation (MAPI), which recently claimed – by citing findings from its own recent survey – that 83 percent of manufacturers believe the soon-to-be-fully enforced health care legislation will be a drag on their company’s short-term and long-term growth.
“Companies are seeing such volatile demand around the world, where orders are good one quarter and off the next. It all comes back to uncertainty,” he tells Leo Rommel of Industry Today. “The uncertainty around the Affordable Care Act is just another cloud hanging over their head, from a tax perspective, a cost perspective, and a hiring perspective.”
He adds, “We even saw a few survey respondents comment that due to the Affordable Care Act, they’re considering hiring more part-time rather than full-time employees.”
They will do this, he says, even though 72 percent of respondents stressed how the well talked-about manufacturing skills gap remains a direly critical issue, even if it is not currently having a direct major impact on their company.
That leads us to the following question: How can American manufacturers capably recruit, hire, and, most importantly, retain qualified and capable personnel if forthcoming health care regulations sway them to offer only part-time or contracted work?
“It’s a great question. Certain critical jobs require specialized skills, and in many cases companies are having a great deal of trouble filling these openings,” Mackey says. “That really speaks to the skills gap, where the skills supply and labor demand are mismatched. Make no mistake, these are high paying, full time jobs with great benefits, and manufacturers are having significant trouble finding qualified candidates .”
Instead, he says, expect to see other professions get the raw end of the deal.
“Other skill sets may be where employers are more flexible,” he explains, without specifying which jobs. “No one – and we have about 2,500 executives in our membership – ever wants to let go of an employee, even in the worst economic times. But companies use contract workers or part-time employees to have the flexibility needed to navigate an uncertain climate like we’ve seen the last few years.”
SO FAR, SO GOOD – BUT CONCERNS LINGER
The aforementioned study, titled Global Growth in 2013 – Outlook and Risk Factors, also reveals a number of other concerns regarding policymakers and regulators in Washington.
In particular, says Mackey, 79 percent of survey respondents also sense that U.S. tax policy will continue to be an anchor on American manufacturing growth.
“For the last several years, we’ve heard a lot of rumblings about the prospect of meaningful corporate tax reform, but we haven’t seen anything concrete yet,” he explains. “Again, uncertainty makes it harder for companies to make investment decisions, and everyone loses.”
He adds that the bulk of his organization’s members have global operations, with their average percentage of sales outside the U.S. “a little north of 50 percent.”
“They’re largely domiciled in the U.S., but they’re also global companies. The reality of our current tax system is that if you make money overseas and want to bring that cash back to invest in the U.S., you’re paying a high tax rate,” Mackey says. “That makes it very challenging for U.S. manufacturers to be competitive.”
What they’d like to see instead, he adds, is not necessarily a tax holiday but “a more equitable, global tax system where companies aren’t penalized for bringing their earnings back to the States to invest in the States.”
All of this chatter about possible health care woes and complex and unclear tax trepidation has triggered a domino effect of uncertainty through manufacturing, both domestically and internationally, Mackey explains.
For instance, survey results yielded that two-thirds of respondents expect weak employment to continue through next year, if not longer, and that 68 percent predict the Eurozone recession will continue through 2014. Similarly, 65 percent anticipate slow-to-medium growth in China in the coming months while about 22 percent predict that another recession will hit the U.S. by the end of next year.
Conflict overseas isn’t helping, either. MAPI’s analysis – administrated before U.S. representatives began contemplating taking military action on reported matters in Syria – showed that one-third of respondents anticipated that instability in faraway nations like Turkey, Syria and Iran may slow worldwide growth.
If the survey was conducted after the Syria matters came to light, Mackey expects that the percentage would be somewhat higher, though certainly nothing to sound the alarm about.
“If I had to put a number on it, 35 percent would increase to 45 percent,” he says. “But I really don’t get a sense from our members that they see this is kind of a recession-creating event.”
The survey mirrors that thinking. While it underlines a number of ongoing worries, it also shines light on how most executives are cautiously optimistic about 2014. Nearly three-quarters of its respondents expect sales to increase over 2013 levels. Even better, 28 percent expect sales to up by 5 percent or more.
In addition, only 21 percent of respondents reported making fewer long-term investments in 2013 than they did in 2012. That’s surely an encouraging sign, as is the 61 percent of respondents who stated that due in part to anemic global growth, the U.S. is an especially attractive place to invest.
“Uncertainty is still the name of the game for our members,” Mackey explains. “We’ve all been hearing that or saying that for the last three or four years, but it’s reality. There’s still this enormous cash hoard that companies are sitting on, and the tax code certainly encourages that behavior, which doesn’t help anyone”
He adds, “Basically, this all boils down to customer demand, which is uneven and weak around the world. Until demand picks up in a meaningful way, manufacturing growth around the world will continue to be middling
About Manufacturers Alliance for Productivity and Innovation (MAPI)
The Manufacturers Alliance for Productivity and Innovation (MAPI), established in 1933, is a nonprofit organization engaged in economic and policy research, and executive education. MAPI’s corporate membership includes U.S.-based and international companies in manufacturing and related business services.