Two conflicting reports seem to paint different pictures regarding the state of U.S. manufacturing in 2015. A Congressional Research Service report from March 2015 received three major criticisms from an analysis conducted by the Information Technology and Innovation Foundation. ITIF published its report on August 24.
The CRS study claimed U.S. manufacturing performed well between 1990 and 2013 compared to similar economic structures in other developed nations. However, ITIF states that manufacturing barely recovered from the recession that started in 2007. Which of these conflicting reports is correct? Both publishers are independent and supposedly create statistical models without bias.
ITIF's first major critique states the CRS uses unofficial data to understate the job losses suffered by U.S. manufacturing between 2003 and 2013. On this point, ITIF may have a case, since the CRS uses information from the Conference Board and from the Organisation for Economic Co-operation and Development. Instead, ITIF crunches numbers through the U.S. Bureau of Economic Analysis, an official arm of the Department of Commerce.
The CRS report states U.S. manufacturing lost 12 percent of its workforce from 2003 to 2013. ITIF claims manufacturers shed employment by 30.7 percent from 2000 to 2013. The decline happened due to cheaper labor overseas during the early part of that decade, followed by the economic recession. The American economy lost nearly 6 million manufacturing jobs from 2000 to 2013, and that industry has yet to recover fully. Reshoring efforts, automation and higher overseas labor has helped manufacturing rebound, but the recovery still needs legislative help from Congress.
Research and development remains a key issue illuminated by ITIF. U.S. manufacturing remains stagnant when it comes to research and development as compared to profits, revenue and reinvestment. Part of this comes from high costs of automation as companies slowly move towards more advanced robotics in factories. As new technologies slowly trickle into manufacturers, highly skilled workers must have knowledge to work these machines. These companies face labor shortages due to a skills gap that has yet to correct itself.
ITIF, led by former members of Congress from both major political parties, states that Congress must do something to help save American manufacturing. Incentives for small businesses to bring products to market represent one way to help. Congress can also help fund public-private partnerships among manufacturers and community colleges to bring about viable training programs for workers. Lower income taxes for businesses may encourage companies to stay in the United States rather than leave for other countries where costs may dip lower.
Based on stock slides in mid-August 2015 due to poor manufacturing output from China, something has to occur from a legislative perspective to make U.S. manufacturing more attractive to companies. No matter which report is more accurate, costs must come down while hiring needs to rise to prevent another economic crash within the industry.
Photo courtesy of Witthaya Phonsawat at FreeDigitalPhotos.net
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