As the race to the Whitehouse marches on, the field of potential candidates continues to narrow, and the related coffee house discussions vary according to the most recent debate outcomes, one topic remains consistent in its need for more detailed attention; U.S. jobs. Last month's article,The Data Behind the State of American High-Tech Manufacturing, highlighted the statistical decline and current state of U.S. manufacturing. Here's a look at four primary reasons for the long-term decline in U.S. manufacturing jobs, and potential solutions for each. These reasons can be best explained as deficits that need to be remedied in order to stabilize U.S. manufacturing jobs and begin creating meaningful numbers of new US manufacturing jobs.
The Skills Deficit
Manufacturing industry experts estimate that there are roughly two million unfilled jobs in U.S. manufacturing today, largely owing to the lack of skilled workers to fill these jobs. With as many as 30% of our workers under the age of 25 being "underemployed", a reasonable first solution would be to systematically address basic training for manufacturing.
Today's U.S. high school graduates are generally not adequately prepared for most jobs on the factory floor, lacking sufficient math skills and specialized skills in everything from quality control to materials handling. A simple six month program targeting enhanced math skills and the basics of manufacturing could be implemented at the high school level as a first level remedy for this deficit. A similar post high school short program curriculum could be offered via vocational training at Junior Colleges or Trade Schools. Both would go a long way towards filling some of the two million openings in manufacturing, and would help establish on ongoing sources of entry level manufacturing workers.
The following chart shows a statistical comparison of the G20's ranking in high tech exports as compared to two decades ago. The first statistic is the rate of growth and placement in rank of each country now as compared to 1994. The second series of statistics is the actual US dollar value and ranking of that value of the high technology exports for each member country.
The Financial Incentives Deficit
Capital equipment depreciation schedules, jobs and training credits, manufacturing R&D credits, and corporate tax rates are all potential tools for increasing manufacturing jobs. Reduction of corporate tax rates is the financial incentive most often discussed, perhaps because it has the appearance of low hanging fruit; but it is not sufficient as a stand-alone remedy. Corporate tax rates for high tech manufacturing in the U.S. should indeed be reduced from 35% to 10%. U.S. high tech manufacturers would benefit further on their tax burden if Modified Accelerated Cost Recovery System (MACRS) depreciation schedules for U.S.-based manufacturing equipment in targeted industry segments were cut in half, allowing high tech manufacturers to take more expense against their high cost equipment purchases in a shorter timeframe. Likewise the minimum threshold on manufacturing capital acquisition costs should be raised from $1,500 to $7,500 so more costs can be expensed at the beginning of the equipment lifecycle, in order to help offset the cash outlay for the equipment acquisitions.
Companies putting their employees through an approved manufacturing skills training program each year should be given a $2,000 tax credit per existing employee they maintain on the job, and a $6,000 tax credit for new manufacturing hires – or alternatively could opt for a $1,000 and $3,000 cash reimbursement grant from the Department of Labor's newly formed (at least in my mind) Department of High Tech Worker Preparedness. Existing R & D tax credits, which tend to be thought of as focused on product and materials, should be clarified and expanded to include a broader range of manufacturing process development and process improvement activities in key manufacturing technologies. The U..S. needs to leverage its lead in R & D to build and maintain a lead in high tech manufacturing.