Saving Manufacturing Jobs

Most Americans don't lie awake at night worrying about the health of US manufacturing. But factories that produce things do matter. They create real wealth and often pay high wages. They spur innovation for new manufacturing. And the nation needs a base level of factories for military and other security purposes.

But as the US economy has slowly shifted toward service jobs, factory jobs have been steadily lost - in fact, in just the past 39 months, some 2.8 million have vanished.

In a new report, the National Association of Manufacturers (NAM) compares the competitiveness of US industry with that of its nine biggest trading partners: Canada, Mexico, Japan, China, Germany, Britain, South Korea, Taiwan, and France.

The survey found the biggest problem besetting US manufacturers is the comparatively high cost of doing business imposed at home. Individually, each tax, health and pension benefit, tort litigation, or pollution control may seem worthy. But the cumulative effect makes unit labor costs in US factories 22 percent higher than at their average foreign counterpart. Only France and Germany top the US in the complex cost index NAM economists use to reach their conclusions.

The study is the most comprehensive look to date at the state of US manufacturing competitiveness, and shows US factories are struggling with more than just low-wage competitors.

Of course, some costs - those for pollution abatement is one example - are the price for a civilized society. Others - such as employee healthcare - were added during times of plenty but during a recession can contribute to a company going bankrupt or being forced to move overseas. In Britain and Canada, a greater share of healthcare costs are paid by the government, so the burden is more evenly spread.

Manufacturers can always do more to improve their competitive edge. But this study underscores the importance of weighing the burden of government policies on the nation's ability to retain well-paid manufacturing jobs.

Simply demanding that other nations, especially poor ones, impose similar environmental, healthcare, and other costs on their companies is not the best way to level the global playing field. Rather, if the US wants to retain manufacturing jobs, it needs to review how each tax and regulation reduces industrial competitiveness, and then decide on the tradeoff.

A natural tension exists between manufacturers and regulators. But NAM's survey should help in the search for an appropriate balance between needed government oversight and a robust manufacturing sector.

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