After a growth pattern in late 2014 and early 2015, statistics show hiring within the U.S. manufacturing sector slowed in 2015 as compared to a peak year in 2014. This hiring slowdown was a reaction to a stronger U.S. dollar overseas and a devaluation of the Chinese yuan.
American companies and policymakers must work together to bolster manufacturing and sustain a growth pattern into 2016. To help do this, firms must shift from a purchase price variance model to an outlook that takes into account the total cost of ownership, notes IndustryWeek.
Purchase price variance looks at the cost of supplies versus the actual cost of the product. Labor expenses, often less expensive overseas, go into the actual cost. When U.S. manufacturing companies look at the total cost of ownership, offshoring jobs usually costs between 15 and 25 percent of a product's overall price. Overseas transportation increases costs, while a longer time to market prevents companies from cashing in on sales sooner.
The federal government can step in to keep U.S. manufacturing employment in this country thanks to more affordable educational and training programs. Instead of bringing down costs for four-year colleges, Congress should help make viable training programs an option. Two-year colleges or special, targeted training programs remain more affordable for students. These potential workers graduate faster and start working sooner in shorter training programs.
A skilled workforce needs training in mechanical engineering and science thanks to increased automation. The Obama administration helped when it allocated $100 million to apprenticeship programs and another $300 million to the development of new manufacturing technology. Advanced automation requires a new class of worker in the American labor force. Instead of grunt work, employees need to know how to operate machines of the future. However, more must be done to sustain growth in 2016 as opposed to a few years into the future.
Congress can also ease regulatory burdens on U.S. manufacturing firms. The legislative body can lower corporate income taxes and devalue the dollar against countries that manipulate their currencies. This saves costs for companies and more money can go into hiring.
Additionally, the federal government can make mining permits less prohibitive as manufacturers try to find minerals that go into their products. Fluctuations in foreign metals markets make finding supplies more difficult, despite an estimated $6.2 trillion worth of metals available beneath U.S. soil. It takes mining companies 10 years or more to receive proper permits to dig for precious minerals. These extra permits increase costs, often compelling U.S. manufacturing firms to seek foreign sources for the key minerals that go into products.
A combination of regulatory easing, a pool of skilled labor and better currency valuation can all help make U.S. manufacturing stronger. Companies and the federal government should work together to make this happen and bring more jobs back to America.
Photo courtesy of Kittikun Atsawintarangkul at FreeDigitalPhotos.net
Become a member to take advantage of more features, like commenting and voting.
Register or sign in today!