Manufacturing Policy Should Strengthen Four Key Areas, According to Brookings Report

"While U.S. manufacturing performs well compared to the rest of the U.S. economy, it performs poorly compared to manufacturing in other high-wage countries," according to Why Does Manufacturing Matter? Which Manufacturing Matters? — a new report from the Brookings Institute. For U.S. manufacturing to achieve its potential and compete with other high-wage countries, the authors contend that policy makers must strengthen four key public policy areas including: Research and development (R&D) — policy makers must support funding R&D to solve problems common to a variety of manufacturing processes, not just R&D needed to develop "breakthrough" products; Workforce development — industry and government must work together to develop lifelong training of workers at all levels, so that they are equipped to collaborate in designing and implementing innovative products and processes; Access to capital — manufacturing firms must have improved access to finance to make productive investments and expand business operations; and, Mechanisms for creating and sharing productivity improvements — policy makers and industry must work together to develop mechanisms that increase the role of workers and communities in creating and sharing in the gains from innovative manufacturing. These problems can be solved with the help of policies designed around three broad recommendations that: Promote "high-road production" — in which firms harness the knowledge of all their workers to create innovative products and processes; Include a mix of policies — that operate at the level of the entire economy, individual industries and individual manufacturers; and, Encourage workers, employers, unions and government — to share responsibility for improving the nation's manufacturing base and to share in the gains from such improvements. The report also highlights that manufacturing matters to the overall U.S. economy because it: Provides high-wage jobs, especially for workers who would otherwise earn the lowest wages; Is the major source of commercial innovation and is essential for innovation in the service sector; Can make a major contribution to reducing the nation's trade deficit; and, Makes a disproportionately large contribution to environmental sustainability. According to the report, several manufacturing sectors make the greatest contribution to these four objectives and present the greatest potential to maintain or expand employment in the United States including: Computers and electronics; Chemicals (e.g., pharmaceuticals); Transportation equipment (e.g., aerospace and motor vehicles); and, Machinery. To support these four industries and firms in other manufacturing industries, the authors contend that the U.S. must urge industry and other stakeholders to develop programs that aid firms in adopting more industry-specific, "high-road" strategies. Read the report...