We worry about losing manufacturing jobs to China, India, or Mexico, but how about Arizona, Oregon, or Alabama? The Milken Institute published in June a report demonstrating that state policies make a difference―some states have been increasing their manufacturing base while others like California have been losing manufacturing jobs. We hear a lot about how the US needs to improve federal regulations and trade policies to be more competitive in manufacturing, but are we doing enough at the state level to incent growth in manufacturing? Can we learn from our neighboring states?
What can state government do?
The state government can help create a pro-manufacturing climate that will keep manufacturers in the state and help bring new ones in. This can be done through tools like:
• Tax credits to offset certain costs
• Improvements in infrastructure including transportation, communications, and utilities
• Help to create and attract a skilled workforce
• Access to credit and research funds
• Promotion of industries or products
• Convening of key stakeholders to increase cooperation and create economies of scale
• Alleviating the burden of bureaucratic complexity
Why should state government do something?
Research shows that for every job created in manufacturing, 2.5 jobs are created in other sectors. At the upper bounds, electronic computer manufacturing and aerospace have multiplier effect of 12-16 jobs. Yes, 15 other jobs are dependent on one job created in that industry. Losing manufacturing jobs not only adversely affects the direct industry but also many local supplier industries. Manufacturing is an industry that creates wealth for its workers and drives broad upward social mobility.
Some suggestions
1. Smart Regulation—Efficient, Stable
Streamline regulatory processes with the assistance of information technologies and targeted incentives that reward efficiency. More transparency and accountability should be built into the process by allowing citizens to evaluate their interactions with government agencies through Internet-based tools. Impose deadlines on government processes similar to the deadlines in the patent processes.
Provide stability in government programs that span multiple terms. Protect new business investors from sudden change in regulations.
2. Enhanced Incentives—Accessible, Accountable
The state can provide a single point of entry for businesses seeking information about incentives and a clear, easily navigable website.
Instead of penalizing businesses with taxes on investments the state should allow an accelerated asset depreciation schedule, provide a low-interest loan guarantee to help finance upgrades to new technologies, and offer an additional tax credit if the new equipment will result in lower carbon output.
The state could provide a publicly accessible website detailing who has received incentives, and it should implement provisions that will recoup lost tax revenue if firms fail to create a certain number of jobs or leave the state within a certain period of time.
3. A Public Awareness Campaign for Modern Manufacturing
The manufacturing field needs help with public image. Conduct an industry-led statewide public awareness campaign to highlight the attributes of modern manufacturing, its important role in the economy, its record of environmental stewardship, and the high-wage employment opportunities it provides.
4. Centers for Excellence—Education, Innovation, and Entrepreneurship
Create a network of education, training, research, and business incubation centers around the state to develop a qualified work force, to invent and commercialize advanced techniques, and to assist
manufacturing start-up businesses.
Subsidize the cost of training the underprivileged in low-employment regions. To encourage at-risk young people to work in manufacturing, they could receive a higher personal tax deduction for their first five years in manufacturing jobs. Manufacturers offering a hiring bonus to those who complete a training program should receive a tax credit equal to the bonus. Manufacturers could earn a tax credit for creating positions at or above the company’s median wage. Manufacturers could also receive a tax credit equal to the amount they paid for an employee’s education or training, and the amount would not be considered taxable income for the employee.
References
“Manufacturing 2.0 – A More Prosperous California”. Milken Institute, June 2009
http://www.milkeninstitute.org/
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