On May 26, 2011, I attended a presentation by Jay Timmons, the new President and Chief Executive Officer of the National Association of Manufacturers (NAM). NAM is the largest manufacturing trade association in the U.S., advocating on behalf of manufacturers in every industrial sector. Mr. Timmons discussed the current state of U.S. manufacturing and NAM's role in the industry.
Manufacturing continues to drive the economic recovery in the U.S., with increased jobs and productivity. The U.S. continues to be the world's largest manufacturing economy. The manufacturing industry in the U.S. has increased employment and productivity over the last 12-18 months, adding more than 250,000 jobs since the beginning of 2010. Mr. Timmons cited a recent Washington Post article about the increase in manufacturing employment in the "rust belt" attributable primarily to a revived automotive industry, innovations that have increased productivity, and a weakened U.S. dollar, making exports more attractive.
Despite the uptick in manufacturing activity, Mr. Timmons stated that anticompetitive federal policies create a cost disadvantage of approximately 18% to manufacture goods in the U.S., primarily due to energy prices, high corporate tax rates, burdensome regulations and legal costs. U.S. manufacturers consume nearly one-third of all energy outputs in the U.S. The maximum marginal U.S. corporate tax rate is 35% making it the highest in the world. The current regulatory environment requires significant compliance costs. Mr. Timmons indicated that there are approximately 120 free-trade agreements being drafted around the world, with the U.S. being party to one. The increased costs referenced above have created barriers to competition throughout the world.
NAM's mission is "to be the voice for all manufacturing in the United States and inform legislators, the Administration, the media, policy influencers and the public about manufacturing's vital leadership in innovation, job opportunity, technological progress and economic security." NAM has three goals: 1) The U.S. will be the best country to headquarter a company, 2) the U.S. will be the best country to innovate and perform research and development, and 3) the U.S. will be a great place to manufacture.
NAM continues to fight for tax reform, including a maximum 25% corporate tax rate, and making permanent the research and development tax credit (which is set to expire December 31, 2011). Mr. Timmons noted that Congress created the research and development credit to maintain its position as the world leader in innovation; but the U.S. is currently ranked outside of the top 10.
Finally, when asked about the lack of a skilled workforce, Mr. Timmons briefly discussed the National Manufacturing Institute (NMI). The NMI is a nonprofit organization affiliated with NAM, focused on workforce development in the manufacturing industry. There is an increased aversion among America's youth regarding manufacturing employment, and NMI is working with colleges around the country to develop a skilled certification program that would provide individuals with credentials applicable to all sectors of the manufacturing industry. Additionally, NMI has developed the "Dream it. Do it." program to educate youth about "modern manufacturing" and the technology, research and development, and innovation that drives the manufacturing industry in the 21st century.
While manufacturing remains an integral component to the future success of the U.S. and our economy, the industry as a whole continues to face significant challenges in this time of economic recovery.
Evan Ogrodnik is a member of Schneider Downs' Manufacturing Industry Group.
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