ANN ARBOR – U.S. factories produce about 75 percent of what the country consumes, but the right decisions by both business and political leaders could push that to 95 percent, say University of Michigan researchers Wally Hopp and Roman Kapuscinski of the Ross School of Business. They are co-authors of “Manufacturing’s Wake-Up Call,” a study by U-M’s Tauber Institute for Global Operations and consulting firm Booz & Company.
As much as 40 percent of U.S. manufacturing could either stay in this country or go elsewhere in the coming years, based on policy decisions. According to Hopp and Kapuscinski, how the U.S. shapes education policy, worker training, the tax code, the regulatory environment, and its relationship with Mexico will determine whether manufacturing continues to rebound or spirals into permanent decline.
The researchers say that finding technically trained production workers is a particularly large issue. Low-skill jobs may be disappearing, but high-skill ones are not. Since 1980, high-skill manufacturing jobs have increased by about 40 percent, despite a drop in total manufacturing employment.
Industry leaders surveyed for the study confirmed that technically savvy production workers are hard to find in the U.S. but are more abundant in other countries. The issue of worker skill will increasingly become a critical policy issue as factories become more automated and driven by new and rapidly evolving technology.
Education has long been a competitive advantage for the U.S. and enabled it to become a manufacturing powerhouse, but other countries have caught up. Schools must recover their vocational training roles, and also become more adept at vocational guidance, to ensure that young people realize the diverse career paths in manufacturing.
“A huge determinant of how many manufacturing jobs remain in the U.S. will be our ability to create a skilled workforce,” said Hopp. Besides supporting and engaging in the education process, companies need to make the manufacturing industry attractive to young people.
“Modern plants are exciting, technical places to work, but the perception has not caught up with reality,” said Kapuscinski. In addition to worker training and education policy, tax policy and regulatory measures can help create a stronger environment for manufacturing. Hopp and Kapuscinski say a simpler code with a tax rate in line with other industrialized nations would help manufacturing grow and boost revenue.
Regulatory compliance is also problematic for U.S. manufacturers, mostly because of the time it takes to get through the process, they say. The main complaint from firms is that regulations are too slow and complicated. Agencies are not responsive to the competitive needs of industry.
Finally, the U.S. must build a stronger relationship with Mexico. While some low-skill operations will be sent offshore every year, keeping them closer will allow R&D and engineering jobs to stay stateside.
Hopp said, “[Ross Perot’s] argument also assumes low-skill jobs would stay in the U.S., if not for Mexico. [But they] would just go someplace else.”
Overall, Hopp says that all of the variables have to line up to make that work. “In the presidential campaign, manufacturing has emerged as an important issue,” he said. “The candidates are all talking about it. This is a big chance.”