February 20, 2013

Bringing factory jobs back to the U.S.

Manufacturers seeking a rebirth at home look to Washington to help speed the process.

By Jeffry Bartash / MarketWatch

(Continued from page 1)

GM Plant in Kansas City, KS
click image to enlarge

General Motors employees in Kansas City, Kan., listen to GM CEO Dan Akerson announce a $600 million investment in the plant Jan. 28. Anecdotal evidence suggests manufacturing employment is getting a boost from “in-shoring.”

David Eulitt/Kansas City Star/MCT

Business leaders, private-sector consultants and most economists say the U.S. has to slash the corporate tax rate. The official rate is 35 percent -- the highest in the industrial world – and the U.S. is no better than middle-of-the-pack even after deductions and other tax breaks are factored in.

Moutray of the National Association of Manufacturers said U.S. manufacturing costs are about 20 percent higher compared to the nation's biggest trading partners. A lower tax rate would reduce the advantage held by foreign rivals.

"Washington can create an environment to make the industry more robust," concurred Karen Kurek, who heads the manufacturing practice at Chicago-based McGladrey, a global business-consulting firm. "President Obama has to take a hard look at taxes."

The problem is, Democrats and Republicans have been talking about reforming the tax code for two years with nothing to show. The political trenches in Washington are dug deep, and it's hard to imagine the battle lines being easily erased. Getting less in taxes from corporations means taking more from somebody else.

Industry insiders also say the government has to get smarter about regulation, push for more free-trade deals and improve the math and science skills of American students so they can fill open manufacturing slots. Companies frequently complain they cannot find enough skilled workers.

Moser of the Reshoring Institute says education should be a huge part of the discussion.

"Kids think manufacturing is dead," he said. "We need more people to become machinists and technicians. Everybody thinks they need to go to college."

With just a bit more help from government, people involved in the industry say, the U.S. could experience a manufacturing rebirth. Companies have already done yeoman's work to set the fuse. Washington just needs to light it.

AllianceBernstein economist Joseph Carson ticks off a number of reasons why America is a much better place to set up manufacturing operations versus a decade ago. The cost of labor, logistics and key raw materials such as natural gas has fallen. U.S. workers are the most productive in the world. The quality of craftsmanship is unparalleled. And manufacturers that remained stateside have been forced to become incredibly innovative to remain competitive on a global basis.

Perhaps just as significant, experts note, wages in China and other faraway countries have surged in the past decade to narrow the gap with U.S. workers. Costs to ship goods back to the U.S. from China, especially bulky items, are another formidable expense.

"There are a lot of positive trends in place, but it may take awhile to show," Carson said.

 

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