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Supply Chain The State of American High-Tech Manufacturing: Part 2 By Ron Keith and Cheryl Krouskos A
s the U.S. presidential race in- tensifies and the field of candi- dates narrows, one topic of dis-
cussion is heard consistently above the racket: U.S. jobs. Last month, in the May issue of U.S.Tech, “The State of American High-Tech Manu- facturing: Part 1” highlighted a sta- tistical decline in manufacturing jobs in the United States. There are four primary reasons
for this long-term downward trend. These challenges can best be explained as deficits that need to be remedied in order to stabilize the U.S. manufactur- ing workforce and to begin creating meaningful numbers of new jobs. Industry experts estimate that
there are roughly 2 million unfilled jobs in U.S. manufacturing today, largely due to a lack of skilled workers. Up to 30 percent of U.S. workers un- der the age of 25 are considered “un- deremployed.” A reasonable solution would be to systematically address ba- sic training for manufacturing. High schools around the coun- try are, in general, not adequately
preparing for most jobs on the facto- ry floor — students lack sufficient math skills, not to mention special- ized skills in areas from quality con- trol to materials handling. A six- month program that targets en- hanced math skills and the basics of manufacturing could be implement- ed at the high school level as a first- round remedy for this problem. Another similar post-high-school
short program curriculum could be of- fered through vocational training at junior colleges or trade schools. Both would go a long way toward filling some of the 2 million current openings in manufacturing, and would help es- tablish ongoing sources of entry-level workers.
Lack of Financial Incentives Capital equipment depreciation
schedules, jobs and training credits, manufacturing research and develop- ment credits, and corporate tax rates are all potential tools for increasing manufacturing jobs. The reduction of corporate tax rates is an often-dis-
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cussed incentive, perhaps because it seems to offer an easy solution, but it is not sufficient as a standalone reme- dy. Corporate tax rates for high-tech manufacturing, if reduced from 35 percent, would indeed be a boon to the industry, but manufacturers would benefit further if MACRS (Modified
Industry experts estimate that there are roughly 2 million unfilled jobs in
U.S. manufacturing today, largely due to a lack of skilled workers.
Accelerated Cost Recovery System) depreciation schedules for equipment were also reduced. This would allow manufacturers
to take more expense against their high-cost equipment purchases in a shorter timeframe. Likewise, the min- imum threshold on manufacturing capital acquisition costs could be raised so that the expense leans more heavily on the beginning of the equip- ment cycle to help offset the cash out- lay for equipment purchases. In addition, companies that put
their employees through approved manufacturing training programs each year could be given a tax credit, per employee they maintain on the job, as well as a much larger credit for new hires. Existing R&D tax credits, which
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tend to be thought of as focused on products and materials, should be clarified and expanded to include a broader range of manufacturing pro - cess developments and process im- provement activities. The U.S. needs to leverage its research capabilities to rebuild and maintain a lead in high- tech manufacturing.
Need for New Technology The development of some new
technologies often yield their own re- wards — social media for example. Yet, while critical, the development of manufacturing technology tends to happen behind the scenes and is often a cumbersome process, with very little fanfare or attractiveness. To help cor- rect this deficit, the USPTO (United States Patent and Trademark Office) should create an expedited approval channel where manufacturers based in the U.S. would be able to apply for materials and process technology patents more easily. The White House could even get
involved, and create a special awards program, perhaps like the Malcolm Baldridge Award, which honors per- formance excellence, but one that specifically focuses on new technolog- ical developments in U.S. manufac- turing. The program would need well-defined criteria and could award incentive-oriented prizes to the top 10 most innovative manufacturers in
the country each year. The Department of Education,
working with the nation’s top engi- neering colleges, could redefine an engineering discipline and specific degree requirements to make manu- facturing engineering its own field of study. It could then be tailored to specific applications, such as the manufacturing engineer with spe- cialized training in statistics, materi- al science, industrial technology, op- erations research, efficiency, supply chain management, etc. A new student loan program
could be developed and underwritten by the government to create incen- tives for enrollment in the program, and make the development of the manufacturing sector a national pri- ority.
Review Trade Agreements Most U.S. trade agreements to
date, from NAFTA to TPP, all focus primarily on eliminating barriers to trade, with very little emphasis on creating or protecting jobs. That is, after all, the nature of free trade, but for it to benefit everyone, the world must have a level playing field. All U.S. trade agreements should
be reviewed, and some renegotiated with the aim of giving workers around the globe the same opportunities. Common overtime laws, leave laws and minimum legal standards for so- cial benefits should be added as a part of the trade pact framework, with bet- ter surveillance and enforcement built in. Compliance with the agreements could be tied directly to a rule set for central bankers in the signatory coun- tries. Direct currency manipulation should have a pre-described, automat- ic penalty associated with it. For ex- ample, if the Chinese Central Bank acts overnight to devalue its currency by 3 percent, all Chinese imports should automatically be subjected to a 3 percent import tariff. This does not disallow central banks from making such moves, but it adds a new dimen- sion of consideration for those in charge — and blunts the power of cur- rency manipulation as a trade tool. A similar type of penalty struc-
ture should be put in place for cases of extreme QE (quantitative easing) manifested in the form of negative in- terest rates put in place by central banks. When a trade partner embarks upon a policy of negative interest, their trade in goods should be immedi- ately subjected to import duties that would offset the negative rate offense. There is much that the U.S. can
do to facilitate manufacturing job cre- ation, but the solution will take more than corporate tax rate adjustments. The resources are available to build the manufacturing sector, but the country needs to pull together and fo- cus them, along with policies and in- centives, toward a common goal. r
June, 2016
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