According to a new report from Deloitte, America can reverse the decline in the manufacturing industry, but only if it encourages innovation, trains workers and addresses tax reform and regulations, while also investing in infrastructure and energy.
The report, “Manufacturing Opportunity,” explains that while low-cost basic manufacturing is unlikely to ever recover its former importance in the economy, it does not mean further decline is inevitable. Deloitte recommends refocusing on long-term opportunities in increasingly complex and emerging technologies—and in America’s ability to lead in the innovation and research and development of such breakthroughs.
“Most Americans believe manufacturing is central to improving the ailing economy and say not enough is being done to support it,” said Craig Giffi, vice chairman and U.S consumer and industrial products leader, Deloitte LLP and the report’s author. “During this election season, candidates have an opportunity to not only recognize the importance of manufacturing but also address ways to support it by fostering innovation, developing talent and making investments in infrastructure.”
“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. They 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 should address corporate tax reform and consider a tax system that positions U.S. 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 National Energy Policy: The definition of a national energy policy could ensure the reliability of fuel sources to power the manufacturing sector.
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 can drive emerging technology development and help propel the United States into and prepare it for the future.
“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.