Reports point to ways U.S. can boost manufacturing

Published October 30, 2014 by Robert Powell, III

Is the U.S. on the cusp of a manufacturing renaissance? Two reports released in recent months suggest that, given some help, small and midsize manufacturers in this country can thrive and create jobs.

The creation of more manufacturing jobs is important to our economy, not only for the boost that additional employment can provide, but also for symbolic reasons.

As a report from the Miller Center at the University of Virginia notes, for decades well-paid manufacturing jobs were the key for millions of middle-class families achieving the “American Dream”:  home ownership, a secure retirement and the opportunity to send the kids to college.

That dream has suffered in recent years as U.S. manufacturing has declined. Since 1972, the number of American manufacturing jobs has dropped by more than 50 percent, from 21 million in 1972 to just 10 million in 2010, according to the Miller Center. In Virginia, manufacturing jobs peaked at 432,500 in 1989 and now total fewer than 230,000.

Some observers have seen this decline as inevitable, with manufacturing jobs moving to countries with the lowest labor costs. The shift in the past two decades have wreaked havoc on regional economies heavily reliant on certain types of manufacturers, such as the textile and furniture-making industries in Southern Virginia.

The Miller Center report, released in June, examined the prospects for a U.S. manufacturing comeback as part of its “Milstein Symposium: Ideas for a New American Century.”  A 14-member panel co-chaired by former Mississippi Gov. Haley Barbour and former U.S. Sen. Evan Bayh of Indiana focused on small and midsize manufacturers as catalysts for change.

The report notes that while the number of manufacturing jobs has shrunk in the past four decades, the percentage of jobs generated by small and midsize companies has risen from 29 to 45 percent of the industry workforce during that time. Companies in these categories, in fact, now represent 98 percent of all manufacturers.  

Despite the long decline of U.S. manufacturing, these companies are increasingly optimistic about their prospects, according to the 2014 Manufacturing and Distribution Monitor, a report released in September by the accounting firm McGladrey LLP, which has offices in McLean and Richmond.

A survey of 900 manufacturing executives found that 67 percent expect to hire more employees in the U.S. during the next year, up from 62 percent last year.  Meanwhile, the percentage of employers expecting to cut back their workforce dropped to 5 percent after ranging from 9 to 11 percent during the past three years.

The optimism found in the McGladdrey report also can be seen in the economic development announcements made by the Virginia Economic Development Partnership since January.  In mid-October, the list included 72 manufacturing projects, 53 of which involved existing companies that are expanding their operations in Virginia.

Nonetheless, both reports note that manufacturers still face many hurdles in remaining competitive.

In the McGladrey report, manufacturers say government regulations represent the biggest obstacle to growth. That broad topic includes implementation of the Affordable Care Act (the employer mandate takes effect next year), Environmental Protection Agency rules and state regulations.

The Miller Center report explored other problems that could limit potential growth and offered recommendations to solve them.  “Outpacing the global competition requires a highly skilled workforce, yet there exists no efficient mechanism to match supply and demand within the labor market, leading to systemic inefficiency,” the commission report says.

One of the problems manufacturers face in creating a skilled workforce, the report notes, is the lingering stigma that workforce training and manufacturing careers have in the K-12 education system.

Even without the stigma, manufacturers face problems investing in training programs. They also have difficulty acquiring new technology, plugging into existing supply chains and bringing their products to market.

Given those issues, the commission had six recommendations:

• Create talent-investment loans: These government-backed loans would help companies expand their businesses, hiring more workers and upgrading their skills.
• Develop  “upside-down” degrees: This program would allow students to get credit toward a bachelor’s degree for technical training, work experience, military training or community college courses.
• Start a skills census: A survey would be routinely conducted to determine what skills employers need now and in the future.
• Launch a national supply chain initiative: A study “mapping” manufacturing supply chains would spot gaps and identify emerging technologies.
• Expand technology and engineering certification programs: The goal here is to give high school students opportunities to get certified technical skills.
• Begin a “big-trends, small firms” initiative: The U.S. Commerce Department’s Manufacturing Extension Partnership would help small and midsized companies acquire and utilize new technologies.

Policymakers should heed the issues raised by both reports. If they want a true revival of the U.S. economy — and a restoration of the American Dream — they should give manufacturers a hand in achieving their growth potential.