us fed election series manufacturing 072412, manufacturing opportunity"

7/30/2019 Us Fed Election Series MANUFACTURING 072412, Manufacturing Opportunity"

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Manufacturing Opportunity

Cag A. G

Craig Gi is a vice chairman and the leader or the U.S. Consumer &

Industrial Products Industry practice spanning the Aerospace & Deense,

Automotive, Process, Industrials, Consumer Business and Retail Industry prac-

tices or Deloitte LLP. Craig is also the chairman o the global manuactur-

ing industry practice o Deloitte ouche ohmatsu Limited (DL).

In addition to his U.S. Consumer & Industrial Products Industry practice respon-

sibilities, Craig has primary responsibility or Deloittes day-to-day activities as amember o the Council on Competitiveness working with industry CEOs, university

presidents and labor leaders to shape the debate on competitiveness. He is also a

rustee o Te Manuacturing Institute helping to drive thought leadership regarding

manuacturing talent, innovation and contributions to the American economy and

participates as a subject matter expert regarding manuacturing competitiveness with

the National Association o Manuacturers (NAM) on their eorts to shape the debate

on the issues impacting manuacturers in the United States and around the globe.

Currently, Craig is leading a multi-year Global Competitiveness in Manuacturing

initiative in partnership with the Council on Competitiveness with the objec-

tives o establishing a global competitiveness index dening both critical driverso competitiveness or nations and companies and the ranking o countries based

on manuacturing CEO input rom around the world. Tis research is help-

ing uncover the new models or success or the 21st century being adopted by the

most capable and competitive global manuacturers today. Craig is also leading

Deloittes manuacturing research eorts with the World Economic Forum; having

recently co-authored the report Te Future o Manuacturingor the Forum. Craig

assisted with the release o this report and helped acilitate CEO, government leader,

and academic leader discussion regarding the reports key ndings at the Forums

annual meeting in Davos, Switzerland in January 2012. Craig is currently leading

Deloittes collaboration with the World Economic Forum on their Manuacturing

or Growth project eort intended to be completed in time or Davos 2013.

Craig is the co-author o the bookCompeting in World Class Manuacturing

Americas wenty First Century Challenge and has been a guest lecturer at the GE

Whitney Symposium, the Council on Competitiveness, the Global Federation o

Councils on Competitiveness, at the World Economic Forums annual session in

Davos Switzerland and the Woodrow Wilson International Center or Scholars on

the topic o manuacturing competitiveness. More recently, Mr. Gi was asked to

testiy beore the U.S. Congress on Deloittes manuacturing competitiveness research.

About the author


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A Deloitte series on making America stronger

Contents

Eecutie summar | 2

Introduction | 5

A crisis o confdence | 6

The elements o competitieness | 10

Making America a more attractie place to conduct business:Action steps or policmakers | 14

Conclusion | 24

Appendi A:The World Economic Forum Future o Manuacturing project | 25

Appendi B:The U.S. Manuacturing Competitieness Initiatie | 26

Appendi C:Understanding American perceptions o manuacturing and tackling thegrowing skills gaps in the United States | 27

Endnotes | 28

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AmeriCAn manuacturing is a world oparadoxes. In the past decade, Americahas lost 6 million manuacturing jobs; yet

today, 600,000 jobs cant be lled in America

because manuacturers cant nd people with

the right skills.

When Americans are asked how they would

create a thousand new jobs in their communi-ties with a new business acility, manuacturing

is their rst choice. Yet 18 to 24yearolds

rank manuacturing dead lastamong indus-

tries in which they would actually choose to

start a career.1

Similarly, 79 percent o Americans believe

a strong manuacturing base should be a

national priority. However, when it comes to

the uture o manuacturing, Americans are

very pessimistic: Only 7 percent believe thatU.S. manuacturing competitiveness is likely

to get stronger, while 55 percent say it will

become weaker.

In short, manuacturing is experiencing

a crisis in condence in the United States.

Americans view the manuacturing sector

as ragile and unstable. Tey are concerned

about the long-term stability o manuacturing

employment. Tey also ear that manuactur-

ing jobs will inevitably be moved to workers

in other countries, and they appear to have

doubts about our leaders ability to prevent

this. Tese views have remained consistent

year aer year.

Te United States is at a crossroads. Low-cost basic manuacturing is unlikely to ever

recover its ormer importance in our economy.

However, this doesnt mean urther decline is

inevitable. New pathways to manuacturing

opportunity in America are both available and

achievable. And public policy has a major role

to play in supporting these directions.

Te rst pathway lies in advanced technolo-

gies and innovation. I America is to regain its

position as a global leader in manuacturingand revive economic prosperity, we must look

to increasingly complex and emerging tech-

nologies, and to Americas ability to lead the

development o such breakthroughs.

Across the spectrum o policy, rom the tax

code to the direct incubation o small busi-

nesses, government policy can either help

Eecutie summar

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spuror inhibitmore innovation. A healthy

manuacturing base drives emerging technol-

ogy development and will help propel the

United States into the uture. Strengthening

manuacturing today will play an integral part

in determining where America will be techno-

logically in 20 years. Government could help

establish consortiums between businesses,universities, and labor and political leaders to

develop long-term U.S. manuacturing goals

and orm a new innovation strategy.

Te second pathway is enhancing talent.

CEOs agree that talent trumps all other ac-

tors gauging manuacturing competiveness.

In act, 67 percent o manuacturers reported

that moderate to severe shortages o available,

qualied workers exist. And 56 percent antici-

pate that these shortages will only grow worsein the next three to ve years. Te workers

hardest to nd are machinists, operators, cra

workers, and technicians. Tere are numerous

ways to center policy on enhancing skills to

meet todays advanced manuacturing needs.

A ocus on perormance-based education and

building government-to-industry partnerships

among many other recommendations can help

prepare talent better. As a country, we need

to arm students with the right technical and

problem-solving skills through fexible educa-

tion pathways that lead to advanced degrees

or certications.

Te third pathway to greater competi-

tiveness is to reorm taxes and regulations.For example, 69 percent o Americans agree

that tax cuts or businesses and individu-

als create jobs, while 65 percent support tax

incentives or manuacturing. In 2011, the

United States had the highest corporate tax

rate among OECD nations. And the United

States is the only G8 member that does not

employ a territorial tax policy, which taxes

only income earned inside the nations borders.

Improvements in intellectual property reormare also needed. Tis reports recommenda-

tions, i implemented, would make it more

attractive or manuacturers to improve and

increase their activities in the United States.

Fourth, the need to invest in inrastruc-

ture development is paramount. Every dol-

lar o inrastructure spending generates an

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additional 60 cents in economic activity.

China, or example, recently devoted 9 percent

o its GDP to inrastructure development,

while the United States has let much o itsinrastructure deteriorate.

Lastly is the issue o Americas energy policy

and its impact on manuacturing. Competitive

energy policies could ensure reliable energy

supplies to literally uel manuacturing.

In short, while policymakers mention

manuacturing all the time, most Americans

dont believe enough is being done to support

it. Eighty percent o Americans think that the

United States should invest more into manu-

acturing. Why? Te linkage between manuac-

turing capabilities and economic prosperity is

a much stronger predictor o a vibrant, suc-

cessul, and growing economy than any other

measure typically used by economists. Simply

put: manuacturing matters.

Tis study looks at the manuacturing

sector and the challenges it aces. It pro-

poses a series o recommendations that, i

implemented, would help the United States

climb back into the drivers seat in global

manuacturing competitiveness.

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Introduction

In March 2011, a major economic milestoneattracted relatively little notice in the nationalpress. Economic consultants rom IHS Global

Insight reported that in 2010, China had sur-

passed the United States. to become the worlds

leading manuacturing nation, with a 19.8 per-

cent share o global output, compared to 19.4

percent or the United States. Chinas share o

world manuacturing output had tripledin just

10 years.2

Perhaps the most surprising thing about

this announcement was how unsurprising

it was.

Manuacturing competitiveness and the

relative importance o manuacturing to the

economy are issues that have been debated or

decades, and hundreds o premature obituar-

ies or U.S. manuacturing have been written.

Spurring these obituaries has been the undeni-

ably long and steady decline in the importance

o manuacturing within Americas overall eco-

nomic mix. In 1947, or instance, 26 percent o

nominal U.S. GDP came rom manuacturing.

By 2011, that gure had allen to less than

11 percent.3Tis decline has been accompanied by

sustained job losses. America has lost about 6

million manuacturing jobs since 2002, 2 mil-

lion since 2008 alone,4 including 28 percent o

its high-technology manuacturing jobs in the

last decade as reported by the National Science

Board.5 As a result, Americas middle class,

which pioneered innovations and technologi-

cal advancements, has also steadily erodedas

has its economic prosperity.

But U.S. policymakers are beginning to

recognize the vital importance o a strong

industrial base as emerging economies seize

upon the economic benets o manuacturing,

and key developed nations such as Germany

demonstrate the resiliency and strength manu-

acturing adds to the mix. In addition to reviv-

ing Americas once prosperous middle class,

a competitive manuacturing sector would be

a critical catalyst or innovation, providing

essential support or sectors including nancial

services, inrastructure development, cus-

tomer support, logistics, inormation systems,

healthcare, education, real estate and more.

Manuacturing typically generates 2.5 jobs in

related industries or each one created directly.6

Tis report relies on collaborative eorts

with a number o organizations working on

important issues aecting the manuacturing

industry, as well as surveys o American citi-

zens, business and labor leaders, and university

and national laboratory executives. It presentsa case or optimismand or hard work. It

examines some o the main challenges acing

any attempt to cultivate an American manu-

acturing renaissance, and highlights recom-

mendations that could help the United States

overcome these roadblocks.

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A crisis o confdence

MAnuACturinG has been a majorcontributor to the U.S. economy ormore than a century and a hal, and Americans

retain a consistently high regard or its impor-

tance both in terms o its economic contribu-

tions and our global standing.

For nearly ve years, Deloitte* has been

working with the Manuacturing Institute

to investigate the average Americans view

o manuacturing in the United States.

Unwavering Commitment: Te Publics View o

the Manuacturing Industry odayreports the

results o an annual research program gauging

the American publics perspectives on manu-

acturing. Findings o the latest annual survey,

released in September 2011, suggest that

despite requent swings o public opinion on a

wide range o topics, Americans have remained

steadast in their commitment to a strong and

globally competitive U.S. manuacturing sector.

Tey ully understand the importance o

manuacturing in job creation; 86 percent

agree that manuacturing is directly linked

to our standard o living (see gure 1), and

77 percent believe it is very important or

our national security. Americans support or

manuacturing carries over into the topic o

job creation as well. When asked how they

would preer to create 1,000 new jobs in their

communities with any new business acility,

* As used in this document, Deloitte means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about or adetailed description o the legal structure o Deloitte LLP and its subsidiaries.

Source: Unwavering Commitment: The Public's View of the Manufacturing Industry Today

77%National security

85%Standard of living

Economic prosperity

86%

THE MANUFACTURING INDUSTRY

IS VERY IMPORTANT TO:

THE U.S. NEEDS A MORE

STRATEGIC APPROACH TO

THE DEVELOPMENT OF ITS

MANUFACTURING BASE

THE U.S. SHOULD

FURTHER INVEST IN THE

MANUFACTURING INDUSTRY

DEVELOPING A STRONG

MANUFACTURING BASE

SHOULD BE A

NATIONAL PRIORITY

83%

80%

79%

Figure 1. Percentage of respondents who believe that...

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Americans indicated they wanted those jobs to

be in the manuacturing sectormore so than

any other industry choice.8

Despite their embrace o manuacturing,

Americans do not believe enough is beingdone to support it. About 83 percent believe

the United States needs a more strategic

approach to the development o its manuac-

turing base, 80 percent think the nation should

invest more in manuacturing; and 79 percent

believe a strong manuacturing base should

be a national priority. We also ound that the

manuacturing industry has several signicant

challenges in the area o public perception (see

gure 2).

While Americans generally hold strong

views on the importance o manuactur-

ing, they hold negative views about its

uture in the United States. Americans

want stronger policies to support manu-

acturing and better leadership to support


Recent economic data have yielded mod-

est reasons or optimism. In 2011, the number

o U.S. manuacturing jobs actually rose by

2.05 percent,9 the rst increase in more than a

decade. But nurturing this growth will require

bold and eective policy decisionsand those

decisions will be made more dicult by a pro-

ound loss o condence in our leaders ability

in this arena.

oday, Americans view the manuactur-

ing sector as ragile and unstable. Tey are

concerned about the long-term stability o

manuacturing employment, and are equally

worried that these jobs are less accessible thanthey should be. Tey also ear that manuactur-

ing jobs will inevitably be moved to workers

in other countries, and they appear to have

doubts about our leaders ability to prevent

this. Tese views have remained consistent

year aer year.

Many Americans, in act, believe that we

have already lost the manuacturing race.

Only 7 percent believe that U.S. manuactur-

ing competitiveness is likely to get stronger,while 55 percent say it is becoming weaker (see

gure 3).10 And unortunately, they are solidly

Source: Unwavering Commitment: The Public's View of the ManufacturingIndustry Today

MANUFACTURING JOBS ARE

AVAILABLE AND ACCESSIBLE


FIRST TO BE MOVED TOOTHER COUNTRIES


HIGHER PAYING THAN JOBS

IN OTHER INDUSTRIES

CAREERS/JOBS IN MANUFACTURING

ARE STABLE AND SECURE RELATIVE

TO JOBS IN OTHER INDUSTRIES

78%

Agree / Strongly Agree

44%

37%

26%

Figure 2. Percentage of respondents who agree or strongly

agree with each statement

Source: Unwavering Commitment: The Public's View of the ManufacturingIndustry Today

STAY THE SAME

WEAKEN

STRENGTHEN

DONT KNOW

Figure 3. Respondents views on the longer-term outlookfor the manufacturing sector

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pessimistic about the ability o government or

business leaders to reverse this trend.

Most Americans agree, or instance, that

the ederal government shouldplay an impor-

tant role in building and sustaining a healthyenvironment or manuacturing. But only 26

percent believe that it is doing so.

CEOs are only a little better. Less than

hal o Americans believe that current business

leaders are creating a competitive advantage

or the U.S.11

CEOs and the Americanpublic agree

Theseviews are shared by business leaders.A Deloitte global survey o manuactur-ing CEOs conducted in conjunction with the

U.S. Council on Competitiveness also ound

serious concerns about U.S. manuacturing

competitiveness. According to the Global

Manuacturing Competitiveness Index devel-

oped by Deloitte and the Council, the United

States is the ourth most-competitive manu-acturing nation and is expected slide to h

place within ve years (see gure 4).

In less than a decade, tectonic shis in

regional manuacturing competence have

created a new world order or manuactur-

ing competitiveness. Asia is the worlds most

competitive location or manuacturingand

will be or the oreseeable uture, barring

signicant macroeconomic shocks such as

war, economic collapse, natural catastrophe or

major government interventions.12

Regional implications will arise as North

America, South America, Europe, and Asia

challenge one another or dominance in

Fiure 4. Expeted ane in manuaturin ompetitiveness in fve ears

Sidin DOWN From To Movin UP From To

United States o America 4th 5t Brazil 5th 4t

Japan 6th 7t Meico 7th 6t

Singapore 9th 11t Poland 10th 9t

Czech Republic 11th 12t Thailand 12th 10t

Netherlands 16th 17t Spain 19th 16t

Switzerland 14th 18t Russia 20th 14t

United Kingdom 17th 20t South Arica 22nd 19t

Ireland 18th 21st Argentina 25th 24t

ital 21st 22nd Saudi Arabia 26th 25t

Belgium 24th 26t

Source: Deloitte and U.S. Council on Competitiveness, 2010 Global Manuacturing Competitieness Inde

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manuacturing. Many rising countries appear

destined to be important only within select

manuacturing sectors, while others pos-

sess the breadth and depth o resources and

capabilities to be dominant global players.

One thing is certain: government policies

within these regions will play an impor-

tant roleor good or badin each coun-

trys competitiveness.

Public polic and thecompetitie parado

T

he Competitiveness Index leads us to

another striking nding. Manuacturing

is declining in Western countries with more

enlightened social and environmental

policies and rising in emerging markets with

large governmental interventions or manu-

acturing. Within these developing countries,

some manuacturers are even government-

owned. Clearly, a new model is emerging.

Many governments, especially in emerging

regions, are aggressively competing or

manuacturing dominance.

Nations sliding down in competitive-

ness, moreover, are losing a core economic

strength, a key link in the innovation equa-

tion o: research, design, manuacture, aer

sales. Tese actors are synergistic, and with-

out the manuacturing step, much know-how

is lost. China, India and Korea are aware o

this and their public policies urther their

competitive advantage.

Regardless o a nations economic or politi-

cal system, however, manuacturing can play

a key role in its prosperity. Economies based

primarily on services could become second tier

in the absence o a vibrant manuacturing sec-

tor and the commercial ecosystem that grows

rom it.

But manuacturers cannot go it alone.

Governments must play their part by develop-

ing policy and national manuacturing strate-

gies that are collaborative, integrated, ocused,

and eective.

RESEARch METhODOlOgy AND BAckgROUND FOR ThIS REPORT

For seeral ears, Deloitte has had the priilege o working with a number o global and nationalorganizations to stud the comple linkages between manuacturing and economic prosperit and

to understand what nations can do to reap the benefts o globall competitie manuacturingcapabilities. Working in collaboration with the World Economic Forum (the Forum), the U.S.Council on Competitieness (the Council), and the Manuacturing Institute, Deloitte has collectedinput directl rom policmakers and business, labor, academic, and scientifc leaders romaround the world to identi was in which public-priate sector collaborations enable economicgrowth, create jobs, and drie innoation and talent deelopment within manuacturing.

The results o these eorts hae included a number o in-depth research reports that haebeen shared with business leaders and policmakers at important enues on the national andglobal stage, including the 2012 World Economic Forum Annual Meeting in Daos, Switzerlandand seeral sessions with policmakers representing Congress and the administration. Whilethe project identifed man common assessments and recommendations or improing

U.S. manuacturing competitieness, each report also deliered unique perspecties criticalto this important debate. The results o these initiaties orm the basis or the analsis andrecommendations in this stud. Summaries o each initiatie can be ound in the appendi.

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To explore how the global manuactur-ing ecosystem is evolving, the WorldEconomic Forum, along with manuactur-

ing specialists rom Deloitte, embarked on a

project called Te Future o Manuacturing

to identiy the actors most likely to shape theuture o competition or both countries and

companies. Te key ndings o this study were

released at the Forums 2012 annual meet-

ing in Davos, including a critical nding or

policymakers concerned with job creation and

economic growth.

Based on recent research at the Harvard

Kennedy School and the MI Media Lab, the

project concluded that manuacturing, or the

ability to make things, is an essential driver

o knowledge creation, innovation, capability

development, and economic prosperity. Te

more advanced the manuactured product,

the greater the prosperity o the nation. Te

linkage between manuacturing capabilities

and economic prosperity is a much stron-ger predictor o a vibrant, successul, and

growing economy than any other measure

typically used by economists. Simply put:

manuacturing matters.13

Deloittes research with the Forum and

the Council also concluded that the uture

o manuacturingseparating winners rom

loserswould be driven primarily by the ol-

lowing actors: talent, innovation, energy, and

government policy.

The elements o

competitieness

Te linkage between manuacturing capabilities and

economic prosperity is a much stronger predictor

o a vibrant, successul, and growing economy than

any other measure typically used by economists.

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Sources:

Uday Karmarkar, The Increase in U.S. Manufacturing Jobs Is Nothing to Cheer About, Harvard Business Review(January 20, 2011),http://blogs.hbr.org/cs/2011/01/why_the_increase_in_us_manufac.html.

http://www.themanufacturinginstitute.org/~/media/A07730B2A798437D98501E798C2E13AA.ashx

Deutsche Bank Group/DB Advisors, The Decline of U.S. Manufacturing: Fact or Fiction? (Frankfurt am Main, March 2011), p. 1,https://www.dbadvisors.com/content/_media/DAM466_CloserLook0311.pdf.

Economic Policy Institute, Updated Employment Multipliers for the U.S. Economy, by Josh Bivens (August 2003), http://www.epi.org/page/-/old/workingpapers/epi_wp_268.pdf.

U.S. Bureau of Labor and Statistics, Department of Labor, http://www.bls.gov/news.release/pdf/empsit.pdf.

CoolingAsian

Economy

StrongEconomic

Headwindsin Europe

RisingLabor &

Other Costsin Asia

World ClassUniversities

and NationalLaboratories

StrongIntellectualProperty

ProtectionPolicies

Strong R&DCapabilities

AdequateInfrastructure

High LaborProductivity

EstablishedSupplierNetwork

QualityHealthcare

LargeMiddle ClassConsumer

Base

DRIVERS THAT MAKE THE UNITED STATES ANATTRACTIVE MANUFACTURING DESTINATION

UNFILLEDMANUFACTURING

JOBS IN THE

UNITED STATESDUE TO SKILLS

SHORTAGE

POTENTIAL NEWJOBS FROM

MANUFACTURING

GROWTH

NEW JOBS CREATED INRELATED INDUSTRIES

POTENTIAL JOBSDRIVEN BY

MANUFACTURING

600,000 + 500,000 + 2,750,000 = 3,850,000

[ ]1 manufacturing jobgenerates 2.5 jobs

Decline inunemployment rate

1947

201126%

of GDP

11%of GDP

6,000,000MANUFACTURINGJOBSLOSTSINCE2002

Figure 5. Manufacturing opportunity in the United States

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Taent

alented human capital will be a critical di-

erentiator or the prosperity o countries and

companies. Millions o manuacturing jobs

around the world cant be lled today due to agrowing skills gap. In the United States, more

than 600,000 such jobs cant be lled due to

skills shortages.14 Despite high unemployment

rates in most developed economies, companies

are struggling to ll

manuacturing jobs

with the right talent.

And emerging nations

cant increase their

growth without moretalent. Access to tal-

ent will only become

more important and

more competitive.

Companies and coun-

tries that can attract,

develop and retain the

highest-skilled tal-

entrom scientists,

researchers, and engi-neers to technicians

and skilled production

workerswill be bet-

ter positioned to come

out on top.

Innovation

Te ability to inno-

vate quickly and eec-

tively will be anotherimportant actor in the

success o countries

and companies in the

uture, as measured by growth in GDP, mar-

ket share, and protability. Companies must

innovate to stay ahead o competition, and

they must be supported by inrastructure and

policies that support breakthroughs in science

and technology as well as dedicated investment

budgets that permit long-term pursuits. In the21st century manuacturing environment, the

ability to develop creative ideas that address

new and complex problems with innovative

products and services will be all-important.

Ener

Aordable clean energy strategies and

eective energy policies will be a top priority

or manuacturers and policymakers, and they

serve as another important dierentiator o

highly competitive countries and companies.

Te demand or and

the cost o energy will

only increase with

uture population

growth and industrial-

ization. Environmentaland sustainability

concerns will demand

that nations respond

eectively and respon-

sibly to the energy

challenge. All nations

will seek competi-

tive energy policies

that ensure aordable

and reliable energysupplies or manu-

acturing, and will be

orced to seeknew

ways o manuacturing

rom energy-ecient

product designs to

energy-ecient opera-

tions and logistics.

Collaboration between

company leaders andpolicymakers will be

an imperative in solv-

ing the energy puzzle.

government poi

Finally, the strategic use o public policy to

urther economic development will become

increasingly important, placing a premium on

collaboration between governments and busi-

ness leaders to create win-win outcomes. Withthe prosperity o nations hanging in the bal-

ance, policymakers must actively seek the right

With the prosperity

o nations hangingin the balance,

policymakers must

actively seek the

right combination

o trade, tax, labor,energy, education,

science, technology,

and industrial policy

levers to generate the

best possible uture

or their citizens.

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Fiure 6. Drivers o manuaturin ompetitiveness (oba vs. te United States and canada)

RANk goba United States and canada

1 Talent-drien innoation Talent-drien innoation

2 Cost o labor and materials Cost o labor and materials

3 Energ cost and policies Economic, trade, fnancial, and ta sstems

4 Economic, trade, fnancial, and ta sstems Energ cost and policies

5 Qualit o phsical inrastructure Legal and regulator sstem

6 Goernment inestments inmanuacturing and innoation Qualit o phsical inrastructure

7 Legal and regulator sstemGoernment inestments inmanuacturing and innoation

8 Supplier network Supplier network

9 Local business dnamics Local business dnamics

10 Qualit and aailabilit o healthcare Qualit and aailabilit o healthcare

Source: Deloitte and U.S. Council on Competitiveness, 2010 Global Manuacturing Competitieness Inde

combination o trade, tax, labor, energy, educa-

tion, science, technology, and industrial policy

levers to generate the best possible uture or

their citizens. In a complex and interdependent

global economy, governments must pull theright levers at the right time while remain-

ing mindul o unintended consequences.

Companies, in turn, must become more

sophisticated and engaged in their interactions

with policymakers to help strike the balanced

approach necessary to enable success or all.

Te Competitiveness Index developed

with the Council provides urther evidence

supporting these ndings. While manuactur-

ing competitiveness traditionally has been

judged by labor, materials, and energy costs,15

todays manuacturing executives note other

qualitative actors (see gure 6) that infuence

American competitiveness:

education and workorce preparation

innovation

economic, trade, nancial and tax issues

inrastructure and

energy policy

Each actor plays an important role in

determining manuacturing competitiveness.

Government is more central to some than oth-

ers; in matters o trade, regulation and taxa-

tion, obviously, it is central. But government

has a role to play in eacha role that will help

determine whether U.S. manuacturing can

remain competitive in the uture.

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Making America a

more attractie placeto conduct business:Action stepsor policmakers

To develop specic recommendationsregarding U.S. competitiveness, Deloitteand the U.S. Council on Competitiveness

sought the input o CEOs, university presi-dents, leaders o U.S. national laboratories,

and labor union leaders. Deloitte conducted

one-on-one interviews with dozens o rep-

resentatives rom these constituent groups

across America and then distilled the recom-

mendations. Tese interviews are documented

in the Councils Ignite series o reports, which

orm the basis or the recommendations

presented here.

An overarching concern consistently andalmost unanimously expressed by executives,

university presidents and national laboratory

leaders was policy, legislative and regulatory

uncertainty. Participants suggested that this

uncertainty directly aects both short- and

long-term decision making. Business leaders

emphasized that they routinely develop strate-

gic business plans and supporting investments

with 10 to 15year horizons, but they must

work under government policies that do not

provide similar long-term clarity or stability.

In particular, many suggested that this uncer-

tainty aects critical cost and competitiveness

variables. University presidents and national

laboratory leaders noted uncertainties tied tounding stability and the consistency o pro-

grams centered on education and R&D.

Participants cited issues such as the clarity

and permanency o R&D tax credits, com-

petitive tax rates, the ratication o ree trade

agreements, tort reorm, nancial reorm, and

policies aecting health care, labor, innova-

tion, energy, and carbon regulation, as well

as long-term unding or important research.

Clear and stable competitive policies in theseareas would generate tremendous opportuni-

ties or American manuacturers and make the

United States an attractive place to invest and

conduct business.

It is important to note that these recom-

mendations were not entirely consistent among

stakeholders. While many agreed on a number

o topics, there were some dierences among

the stakeholder groups; the ollowing recom-

mendations are culled rom those outlined in

one or more o the Ignite reports.

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Education and workorcepreparation

MAnuACturinG CEOs agreed thatworker talentspecically the talentthat drives innovationtrumps all other ac-tors in gauging competitiveness.16 Developing

this talent through education, then, is

the most important element in ensuring

manuacturing success.

Taent sortaes

Te existence o a substantial and growing

U.S. skills gap in science, technology, engi-

neering, and math (SEM) disciplines is well

documented, and the gap is having obvious

eects on competitiveness. In the 2011 survey

conducted by Deloitte and the Manuacturing

Institute, 67 percent o responding manuac-

turers reported moderate to severe shortages o

available, qualied workers; 56 percent antici-

pate that these shortages will grow worse in the

next three to ve years.

And the talent shortage inevitably aects

American innovation. As the Baby Boomer

generation wanes, losses o skilled workers,

scientists, researchers, engineers, and teach-

ers will have a lasting impact on manuactur-

ing competitiveness and thus the country as

a whole. Without radical action, most 21st

century workers are likely to be less skilled

than their Baby Boom counterparts.17

In an era o widespread unemployment,

manuacturers reported that 5 percent o

positions at their rms were unlled due to a

lack o qualied candidates. As noted above,that represents more than 600,000 jobs that

cant be lled today because employers cant

nd people with the right skills. Seventy-our

percent indicated that employee shortages or

inadequate talent in skilled production roles

were hurting their ability to expand operations

or improve productivity. Eleven percent o

respondents were considering relocating, and

among these, the most commonly cited reason

was greater access to qualied talent.

Survey respondents also indicated that the

workers hardest to nd today include machin-

ists, operators, cra workers, and technicians

and these are the positions they also expect to

be hit hardest by retirement over the next three

to ve years.18 As these experienced employees

retire, nding younger talent to replace themwill become an increasingly dicult challenge.

STEM teain defienies

One reason or the skills gap is a long-

term shi in educational ocus, both in the

classroom and in teacher training programs.

According to many o the university presidents

and national laboratory leaders participat-

ing in Ignite 2.0: Voices o Voices o American

University Presidents and National Lab

Directors on Manuacturing Competitiveness,

in recent decades, the emphasis in teacher

education has shied strongly away rom

subject-matter content and toward pedagogy,

the theory o teaching itsel.19 Tis has led to

critical deciencies in the teaching o SEM

subjects in particular.

Most o the business executives par-

ticipating in Ignite 1.0: Voices o CEOs on

Manuacturing Competitiveness said U.S.students are less interested and perorm more

15


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poorly in science and engineering disciplines

than oreign students.20 Put simply, many

American educational programs are not teach-

ing SEM topics well, and just as importantly,

they are ailing to make these disciplinesseem important, interesting or rewarding

to students.

Te global business community does report

concerns regarding engineering graduates

rom institutions in emerging markets, due to

ongoing questions about instructor qualica-

tions, soaring student-teacher ratios and the

variability o curricula. Despite these concerns,

however, the emergence o a large and skilled

technical workorce is one o the most impor-tant actors driving the competitiveness o

nations such as China and India.21

Perceptions o manuacturing careers

are also are hurting the United States abil-

ity to develop a highly talented workorce. In

another study conducted by Deloitte and the

Manuacturing Institute, 1824-year-olds rank

manuacturing dead lastamong industries in

which they would choose to start a career.22

Moreover, even students pursuing SEM

disciplines oen ail to translate their studies

into technical careers. According to a recent

study by Georgetown Universitys Center on

Education and the Workorce, more than 30

percent o engineering, computer science, andmathematics majors choose careers in business

or proessional services rather than in science

and engineering.23

America is still a vibrant and innovative

country, and its manuacturers still represent

an extremely valuable knowledge base. But

our ability to innovate and to address complex

scientic, technological, and social challenges

is in jeopardy. Most o the leaders participat-

ing in the various reports cited throughoutthis document agreed that U.S. manuactur-

ing competitiveness can be improved only

i Americans become more interested in

manuacturing through educational programs

that portray the industry as a valuable career

choice with good employment opportunities.

Furthermore, we need to arm students with

the right technical and problem-solving skills

through fexible education pathways that lead

to advanced degrees or certications.

Education leaders should be aligning educational

pathways in degree programs to portable,industry-recognized skills credentials, creating

more on and o ramps, says Emily Stover

DeRocco, ormer president o Te Manuacturing

Institute. Tis could help close the gap between

the skills manuacturers need and those held

by graduates entering the workorce.

16


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REcOMMENDATIONS: EDUCATED WORKFORCE

Participants in the Ignite series oered the ollowing recommendations to improe Americasabilit to deelop an educated and prepared workorce.24 While the recognized budgetchallenges and the imperatie o reducing the ederal defcit, participants consistentl eltthat unding in these areas were essential to U.S. manuacturing competitieness.

Maintain on-term,predictable edera and state support or universities,ommunit oees, and te nations resear and siene inrastruture.

c u.s. pbc ad g dca dvpg k cc, cg, gg, ad a.

The reial o Americas STEM talent pool must begin in the earliest gradeswith teachers who are ull prepared to teach and inspire the net generation

o proessionals. As part o this eort, the United States should:

At the state leel, adopt consistent standards and curricula or STEM disciplines.These standards should be tied to metrics ollowed in other leading manuacturing economies.

Proide guidelines and incenties to attract and retain primar and secondar STEM teachers whoare true subject-matter eperts that are able to prepare students or degrees or certifcations.Incenties such as continuing education opportunities could be oered to current STEMteachers. The nextgeneration o teachers could be cultiated with scholarship programsthat attract top high-school talent to pursue STEM education. K12 sstems could beoered discipline-linked salar tiers similar to those proided to college and uniersitproessors to reward teachers or deeloping and maintaining subject-matter epertise.

Dvp fxb g dca ack a stem ac gc cg, vcaa ad c, wk-ag pga, c.

spp a v aac g-cab d stempga ad ca b gada stem dcp.

Dvp av a p ad ak aacg a a va ad g-va dw wadg g- ca pp g c ad cg d.

This commitment should inole ocused, creatie, and measurable initiatiestargeted at todas and tomorrows studentsand parents.

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wk p ca cc, gg, ad aacg.

Advac pac-bad ga ad cv c a AcaComPetes Ac, ea ad scda edca Ac, Ca D.Pk Ca ad tcca edca Ac, ivg ivad, ad rac tp ad tac icv d.

Bcak b pacc c a a ccdg aacg ad ag p stem a.

expad pga c a h hada ad pjc ab/cwkc ag a ad a acv a p, dadvaagd

, ad pd va cc ca kd ad.

17


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Innoation

ACross the spectrum o policy, rom thetax code to the direct incubation o smallbusinesses, government has an important role

to play in boosting innovation.

A healthy domestic manuacturing base

is important i the United States is to benet

rom emerging technologies in the uture. For

example, the shiing o television production

to Asia cost the United States its opportunity to

develop next-generation fat panel technology,

a competency that later proved instrumental in

the design and manuacture o solar panels.25

Te ompetitive andsape

Globalization and technological progress,

especially in advanced communications, have

put American workers into direct competi-

tion with rising, leading-edge talent pools

worldwide. And while many o the lead-

ers participating in the Ignite series agreed

that the U.S. should not engage in a race to

the bottom with other nations concerning

wages, nationwide discussion is increasing

on the topic o how to reestablish the United

States as an attractive and competitive loca-

tion or R&D and customer support unc-

tions. Bringing much o this capability back

is becoming a protable and ecient decision

or companies.26

Many elt manuacturing is in act a

misnomer, since it ails to address the many

sectors, including universities and colleges,

national laboratories and other private and

public bodies that support the manuactur-

ing ecosystem. And while many participating

in the Ignite series elt that the United States

is still capable o manuacturing high-qualitygoods at very competitive prices, they also

believe that competing on wages alone would

not be benecial to American manuacturing

and that the United States must ocus on and

support the R&D and innovation phases o

manuacturing i it is to retain any lasting edge

in competitiveness.

Fosterin a imate or

manuaturin innovationAccording to CEOs around the world, other

nations have done a much better job in creat-

ing, pursuing, and communicating national

innovation strategies (see gure 7). Germany,

or instance, has established a comprehensive

national strategy across all its ederal min-

istries with goals and timetables or critical

elds, and it greatly increased its research and

development unding.27 Germanys Fraunhoer

Institute, jointly unded by government andprivate contracts, is Europes largest applied

research organization, conducting both un-

damental and applied research and early-stage

commercialization development.28

Many CEOs participating in Ignite 1.0

said they would like to see the United States

oster similar instruments or manuactur-

ing innovation. Tey believe that government

Many elt manuacturing is, in act, a misnomer

since it ails to address many sectors, including

universities and colleges, national laboratories,

and other private and public bodies that

support the manuacturing ecosystem.

18


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Source: Deloitte and U.S. Council on Competitiveness, 2010 Global Manufacturing Competitiveness Index

GOVERNMENT INTERVENTION & OWNERSHIP IN COMPANIES

ENERGY POLICIES

ENVIRONMENTAL POLICIES

LABOR LAWS & REGULATIONS

ECONOMIC DEVELOPMENT

HEALTHCARE POLICIES

SCIENCE, TECHNOLOGY AND INNOVATION

IMMIGRATION POLICIES

INFRASTRUCTURE DEVELOPMENT

SUSTAINABILITY POLICIES

TRADE POLICIES

IMMIGRATION POLICIES

PRODUCT LIABILITY LAWS

HEALTHCARE POLICIES

CORPORATE TAX POLICIES

GOVERNMENT INTERVENTION & OWNERSHIP IN COMPANIES

TECHNOLOGY TRANSFER AND ADOPTION

INTELLECTUAL PROPERTY PROTECTION

INFRASTRUCTURE DEVELOPMENT

SCIENCE, TECHNOLOGY AND INNOVATION

INTELLECTUAL PROPERTY PROTECTION

FOREIGN DIRECT INVESTMENT POLICIES

69.3%

65.7%

62.0%

56.9%

56.2%

27.7%

32.1%

32.7%

42.9%

51.0%

53.1%

59.2%

61.2%

75.5%

46.1%

43.4%

42.1%

36.8%

31.6%

31.6%

36.8%

42.1%

China

Europe

United States

Competitive ADVANTAGESCompetitive DISADVANTAGES

Figure 7. Policy advantages and disadvantages (percent indicating advantage or d isadvantage)

19


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REcOMMENDATIONS: INNOvATIONParticipants in the Ignite series oered the ollowing recommendationsto improe Americas abilit to innoate.

Estabis a onsortium o business, universit, abor, and poitia eaders to deveopon-term U.S. manuaturin oas wit a 15 to 20ear deveopment orizon.

This consortium should work collaboratiel to crat inestment anddeelopment programs as well as the educational, technological, and intellectual

inrastructure needed to support progress toward those goals.

Dvp a u.s. va ag a ab pga pp bacad appd ac aacg va ad ccaza.

This strateg should aim at eliminating barriers to collaboration among uniersities,laboratories, and other priate and public entities. Its programs should be supportedwith long-term unding mechanisms that insulate them rom the uncertainties oelection ccles. A major goal should be the establishment o public and priatel undedpathwas to drie innoatie ideas and technologies through the alle o deathwhere man inentions and new technologies tend to dieto commercialization.

ica b pbc-pva d c a cvac , d, ad b a c advacg ac ad -cc ccaza.

ecag aa aba dvp -dv vacca aa w badg d aa cd cc dvp.

This would include leeraging the abilit o Americas national laboratoriesto drie applied research on the journe to commercialization, as well as theestablishment o succinct and concise goals in areas important to the United Statesor economic deelopment as well as national securit, deense, energ, etc.

This eort should also support the laboratories role in communit outreach

programs, such as educational outreach to local primar and secondarschools, nearb corporations, and the communit at large.

investments in the areas o science, technology,

and engineering can substantially improve

manuacturing competitiveness. Such invest-

ments could include the establishment o

support research institutions, technologicalsupports or manuacturers, and the encour-

agement o local manuacturing clusters.29

co-oatin R&D andmanuaturin

University leaders and national research

laboratory executives participating in Ignite 2.0

underscored a similar point. Many advocate

government support or sector-specifc indus-

trial clusters that place universities, national

laboratories, and companies in close proxim-

ity to optimize the commercialization o new

ideas, citing examples such as the biomedicalclusters in Ohio and Massachusetts.

Co-located research and manuacturing

connections encourage continuous product

and process improvement promoting the

maturation o basic research into applied

research, and the transition o pilot projects

into ull commercialization. Tey would

enhance the quality and return on investment

o breakthrough discoveries.30

20


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Economic, trade, fnancial,and ta issues

R

eGulAtory compliance costs, labor laws

and regulations, and intellectual property

protection and enorcement all have a strong

infuence on competitiveness and growth.

A 2008 study ound that U.S. manuacturers

on average spend nearly 18 percent more on

non-production expensesthe cost o energy,

taxes, employee benets, torts, and pollution

abatementthan do their counterparts in the

nations major trading partners.31

Tax poiAmericans show strong support or tax

policies that support competitiveness; 69

percent agree that tax cuts or businesses and

individuals create jobs, while 65 percent sup-

port tax incentives or manuacturing.32

High tax burdens. axes represent a

substantial burden or U.S. manuacturing.

In 2011, the United States had the highest

corporate tax rates among the OECD nations,

up rom second place in 2010.33

Critics o U.S.corporate tax policy note that the nations rates

have remained virtually unchanged or the

past two decades, even as competitor nations

have lowered theirs.34 High corporate tax rates

(as well as questions regarding permanency o

tax credits and policies) reduce manuactur-

ers ability to invest with condence over the

long term.

Repatriation could boost competitive-

ness. Business leaders interviewed or the

Ignite series oen cite the ability to repatriate

cash rom abroad as a means to boost com-

petitiveness. Te United States is the only G8

member that does not employ a territorial tax

rate policy, which taxes only income earned

inside the nations borders.35 Even a policy

allowing U.S. rms to repatriate cash at a

lower tax rate could help level the playing eld

between domestic and oreign manuactur-

ers and encourage U.S. companies to increase

domestic investments.R&D tax credit. Still another perti-

nent issue mentioned byIgnite participants

concerns the research and development tax

credit, which has existed in varying orms as

a temporary but perennially reauthorized

measure or nearly three decades, earning it

what theJournal o Accountancyhas calledwell-deserved reputation or complexity and

uncertainty.36

Inteetua propert protetion

Protecting American intellectual prop-

ertywhether by trademark or a new brand

or by patent or a new technological innova-

tionis essential to maintaining competitive-

ness. A 2005 National Bureau o Economic

Research study, or instance, concluded thatimprovements in intellectual property rights

result in increased technology transer by

multinational enterprises.37

Trade poi

International trade agreements, too, are an

obvious competitive actor in an era in which

95 percent o our manuacturers potential

customers live outside the United States.38

While the topic o trade policy was consistently

important to all stakeholders participating

in the Ignite series, there were clear simi-

larities and dierences between business and

labor leaders.

For example, both groups elt more needs

to be done to ensure the enorcement o U.S.

rights under existing trade agreements, and

to ensure compliance with WO including

legal action against countries that violate trade

policy and limit the United States ability to

compete airly in the global marketplace. Both

groups also elt the United States should estab-

lish air and equitable ree trade agreements

that address various aspects o the business

environment in competing countries, includ-

ing labor laws and regulations concerning

minimum wages, child labor, working condi-

tions, human rights, environmental protection,

and workplace saety.

Where the groups diered concerns thenotion oen described as air trade vs. ree

trade. While many executives interviewed

21


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REcOMMENDATIONS: ECONOMIC, TRADE, FINANCIAL, AND TAx SySTEMSParticipants in the Ignite series oered the ollowing recommendations toimproe Americas economic, trade, fnancial, and ta sstems.

i a cpv da cpa ax a pvdg- ca ad ab ad gba cpv a.

This should inole the reduction or elimination o taes on repatriated oreign earningsand permanent research and deelopment ta credits that aor U.S.-based innoation,continuing STEM education, and the acquisition o R&D equipment and inrastructure.

Dvp a bcakg pc aaz pac gv ga gba cpv.

This could help d iminish the cost and compleit o regulator compliance.The nations oerlapping ederal, state, and local regulations are challengingto naigate and can create barriers to innoation and growth.

Dvp a w ad p ad a-ack a qckab a ad qab ad ag.

One task should be the establishment o a set o principles to guide the ormulation o benefcialtrade agreements that address enironmental and worker protections and resole trade imbalances.

Aggv p c a cca agWto Da Agda w gba ad ba.

by Deloitte and the Council support recent

ree trade negotiations, such as those with

Korea (which promise to boost U.S. exports

by $10 to $11 billion), Colombia, and Panama,

many labor leaders interviewed or Ignite3.0 expressed rustration with these agree-

ments, calling them unair, one-sided, and

detrimental to national security, U.S. industry,

and American workers.39 Tey argued that

narrowly dened trade policies alone are not

sucient to position U.S. businesses airly

in the international marketplace and may be

detrimental to domestic production.40

Inrastructure

TrAnsPortAtion inrastructure isvitally important to U.S. manuacturingcompetitiveness in terms o attracting busi-

ness investment, improving the eectiveness o

logistics, the movement o raw materials, and

in producing nished products on time and at

minimum cost. Modern power grids and tele-

communications networks play similar roles in

moving energy and inormation.

In addition to improving Americas road-ways, airports, waterways, electric grid, and

broadband capabilities, inrastructure invest-

ments also can create long-term, high-paying

jobs in the United States, putting thousands

o people back to work while encouraging

private investment. Te Federal Aid Highway

Act o 1956, the largest public works project

in U.S. history, is oen cited as an example o

how large, nationally supported inrastruc-

ture projects can create long-term benets

and prosperity. Proponents o greater inra-

structure investment also point to recent

Congressional Budget Oce estimates which

suggest that every dollar o inrastructure

spending generates an additional 60 cents in

economic activity.41

22


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Americas competitors understand the

importance o modern inrastructure. In

2005, China devoted 7.3 percent o its GDP

to inrastructure development; by 2009, this

share had risen to about 9 percent. A largeshare o this spending went to the rail sector,

which saw a 70 percent increase in xed-

asset investments.43

Inrastructure improvement is perhaps the

clearest example o how government action

can improve manuacturing competitiveness

especially in areas that improve the eciency

o exports as well as job creation. And the

opportunity is not limited to the ederal gov-

ernment. States, or example, can help metro-

politan regions resolve issues with trac fow.

Ener

Clean, reliable energy is an all-important

element o manuacturing production. With

increasing demand or and limited supplies o

traditional energy sources, market orces will

play a crucial role in driving the development

and adoption o alternative orms o energy

and its ecient use. Alternative energy sources

also promise a competitive advantage or anynation that can develop them eectively.44

Alternative energy solutions could create

many more manuacturing jobs. U.S. labor

leaders, noting orecasted growth in this area

rom 9 million jobs in 2007 to as many as 37

million in 2030 (many o them not subject

to oshoring to overseas markets), strongly

support policies to promote the research,

development and production o alternative

energy (solar panels, wind turbines, advanced

batteries, etc.).45 Tey also avor an extension

o the Advanced Manuacturing ax Credit,

which provides incentives or investments in

the advanced energy products, and may prove

critical i America is to lead the next genera-

tion o manuacturing.46

REcOMMENDATIONS: INFRASTRUCTUREParticipants in the Ignite series oered the ollowing recommendations to improeAmericas inrastructure.

To ensure on-term undin, te United States soud reate a nationainrastruture bana overnment-owned et independent and proessionamanaed entit responsibe or manain investment in and te on-term fnanin o reiona and nationa inrastruture projets.

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A a ad ca gv w dg ac pjc b pvdg dagaa w bwg c ad z dp cpa bd ak.

To urther this eort, Congress should reinstate the Build America Bonds program, whichissued $181 million in taable municipal bonds beore epiring at the end o 2010.

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23


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The stakeholders participating in the jointeorts between Deloitte, the Forum, theU.S. Council on Competitiveness, and the

Manuacturing Institute understand that U.S.

manuacturing is at a crossroads. Low-cost,

basic manuacturing is unlikely to ever recover

its ormer importance in our economy; our

long-term opportunities lie in increasingly

complex and emerging technologiesand in

Americas ability to lead in the development

o such breakthroughs. aking ull advantage

o these opportunities will require sustained

commitments to rebuilding our education

system and creating and cultivating an eec-

tive ecosystem o public-private research and

product development.

Most Americans understand that our

economic success is closely linked to our

ability to make useul and valuable products.

Government can advance eorts to retain that

ability by supporting the solutions summarized

in this report, which can help the United States

regain its global lead in manuacturing or

many years to come.

Conclusion

Low-cost, basic manuacturing is unlikely to ever

recover its ormer importance in our economy; our

long-term opportunities lie in increasingly complexand emerging technologiesand in Americas ability

to lead in the development o such breakthroughs.

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In January 2011, in response to a callto action rom manuacturing CEOs atDavos, Switzerland, the World Economic

Forum joined with manuacturing special-

ists rom Deloitte to establish the Future o

Manuacturingproject, with the objective o

exploring the evolution o the global manu-

acturing ecosystem and identiying pivotal

drivers o change and the actors most likely

to shape the uture o competition. A year

later, at the World Economic Forums 2012

Annual Meeting in Davos, manuacturing

leaders, including numerous CEOs and senior

executives, participated in public and private

sessions, unveiling a dra report titled he

Future o Manuacturing: Harnessing the Power

o Global Manuacturing or Economic Growth.

Te nal Future o Manuacturingreport was

released in a joint Forum-Deloitte media con-

erence in okyo in April 2012.

Based on strong support rom CEOs and

policymakers in Davos in January 2012,

Deloitte and the Forum are now collaborating

on a new initiative calledManuacturing or

Growth. Tis initiative will assess the value-

added economic benets, employment impact,

and growth potential o dierent types o

manuacturing and deliver recommendations

to stimulate high-multiplier manuacturing.

Appendi A:

The World Economic ForumFuture o Manuacturing project

25


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SinCe 2009, Deloitte has collaborated withthe U.S. Council on Competitivenesson the U.S. Manuacturing Competiveness

Initiative, a multi-year, multi-phase project

ocused on improving the U.S. manuacturing

sectors ability to compete and prosper glob-

ally. Te ndings o this initiative, including

overall recommendations or policymakers,

were documented in the CouncilsMAKE

report o December 2011, and were inormed

by research conducted by Deloitte on behal o

the Council that included a recurring survey o

more than 400 global manuacturing CEOs as

well direct ace-to-ace interviews with nearly

80 U.S. business, academic, scientic, and

labor leaders.Tis research reached a disturbing conclu-

sion that should raise a red fag or U.S. poli-

cymakers, business leaders, and the American

public: the United States is perceived as

ranking ourth in global manuacturing com-

petitiveness, behind China, India, and Korea,

and it is expected to all behind Brazil as well

within the next ve years.

Deloittes collaboration with the Council

has yielded the ollowing reports: Te Global Manuacturing Competitiveness

Index, a biennial survey o about 400 global

manuacturing CEOs that pinpoints talent-

driven innovation as the most important

driver o global manuacturing competi-

tiveness, ollowed closely by cost o labor

and materials; energy costs and policies;

economic, trade, nancial, and tax systems;

and quality o physical inrastructure.

Te Ignite series consists o three reports

that oer recommendations to U.S.

policymakers on improving Americas


Based on interviews with the CEOs rep-

resenting organizations such as Deere, Ford,

General Electric, Lockheed Martin, andHoneywell, Ignite 1.0 outlines the changes

executives eel are needed in energy and tax

policy, the regulatory and legal environment,

and inrastructure investment to improve U.S.


Ignite 2.0 builds on these perspectives and

recommendations. Based on interviews with

the presidents o institutions including MI,

the University o Michigan, Michigan State

University, Ohio State University, Carnegie

Mellon, Georgia ech, and the University o

Caliornia, as well as directors o key national

laboratories in the United States, this second

report ocuses on how policymakers and

the business, academic, and scientic com-

munities can work together to ensure that

America has a highly skilled and talented

workorce, and to create pathways that drive

innovation through basic and applied research

to commercialization.

Finally, Ignite 3.0 outlines recommenda-tions on linking U.S. policy with job cre-

ation rom labor leaders such as Leo Gerard,

president o the United Steelworkers Union;

Bill Hite, general president o the United

Association o Plumbers and Pipetters; and

R. Tomas Buenbarger and Own Herrnstadt,

both with the International Association o

Machinists and Aerospace Workers.

ogether, the Ignite reports provide a

set o recommendations capable o orm-ing the oundation o a long-term U.S.

manuacturing strategy.

Appendi B:

The U.S. ManuacturingCompetitieness Initiatie

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For nearly ve years, Deloitte has workedwith the Manuacturing Institute and itsormer president, Emily Stover DeRocco, to

investigate the average Americans view o

manuacturing and the growing skills gap

in the United States. wo recurring sur-

veys conducted jointly by Deloitte and the

Manuacturing Institute oer unique views o

the eectiveness o policymakers and business

leaders in ensuring that the United States con-

tinues to have a robust manuacturing sector,

as well as the challenges manuacturing execu-

tives ace concerning employee education, tal-

ent cultivation, and perormance management.

Tese two reports are:

Unwavering Commitment: Te Publics View

o the Manuacturing Industry oday, which

reports the results o an annual research

program, gauging the American publics

perspectives on manuacturing. Findingso the third annual survey, released in

September 2011, suggest that despite re-

quent swings o public opinion on a wide

range o topics, Americans remain steadast

in their commitment to creating a strong,

healthy, globally competitive manuacturing

sector in the United States.

Boiling Point? Te Skills Gap in U.S.

Manuacturing, based on an annual, nation-

wide survey o company executives, which

seeks to answer several important questions

about the nature o the skills and talent gaps

in manuacturing today:

What impact is the skills gap having on

company perormance?

How is it evolving in the ace o contin-

ued economic and competitive chal-

lenges? Which manuacturing jobs are

being aected the most?

What does the uture o talent look like?

What upcoming trends are companies

preparing or today? How ast are these

changes occurring?

Appendi C:

Understanding Americanperceptions o manuacturingand tackling the growing skillsgaps in the United States

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1. Deloitte and Te Manuacturing Insti-tute, Unwavering Commitment, p. 3.

2. Peter Marsh, Emerging Economies FlexManuacturing Muscle, Te Financial imes(March 14, 2011), http://blogs..com/beyond-brics/2011/03/14/emerging-economies-fex-manuacturing-muscle/#axzz1kRi1RNyE.

3. Deutsche Bank Group/DB Advisors, TeDecline o U.S. Manuacturing: Fact or Fic-tion?(Frankurt am Main, March 2011), p. 1,

https://www.dbadvisors.com/content/_me-dia/DAM466_CloserLook0311.pd.

4. Uday Karmarkar, Te Increase in U.S.Manuacturing Jobs Is Nothing to CheerAbout, Harvard Business Review (January20, 2011), http://blogs.hbr.org/cs/2011/01/why_the_increase_in_us_manuac.html.

5. Report: US Lost 28% O High-echManuacturing Jobs, Manuacturing.Net,January 19, 2012, http://www.manuactur-ing.net/news/2012/01/report-us-lost-28-o-high-tech-manuacturing-jobs.

6. Economic Policy Institute, Updated Employ-ment Multipliers or the U.S. Economy, by JoshBivens (August 2003), http://www.epi.org/page/-/old/workingpapers/epi_wp_268.pd.

7. Deloitte and Te Manuacturing Institute,Unwavering Commitment: Te PublicsView o the Manuacturing Industry oday(2011), p. 1, http://www.deloitte.com/as-sets/Dcom-UnitedStates/Local%20Assets/Documents/us%20cip%202011PublicViewon-ManuacturingReport%20090811.pd.

8. Deloitte and Te Manuacturing Institute,Unwavering Commitment, pp. 7 & 9.

9. Deloitte analysis.



12. Deloitte and Te U.S. Council on Com-petitiveness, 2010 Global ManuacturingCompetitiveness Index(June 2010), p. 14,http://www.deloitte.com/assets/Dcom-Global/

Local%20Assets/Documents/Manuacturing/dtt_2010%20Global%20Manuacturing%20Competitiveness%20Index_06_28_10.pd.

13. http://www3.weorum.org/docs/WEF_MOB_FutureManuacturing_Report_2012.pd

14. http://www.themanuacturinginstitute.org/~/media/A07730B2A798437D98501E798C2E13AA.ashx

15. Deloitte and US Council on Competitiveness,2010 Global Manuacturing Competitiveness In-dex, p. 7.; and Deloitte ouche ohmatsu, 2010.

16. Deloitte and Te U.S. Council on Com-

petitiveness, 2010 Global Manuactur-ing Competitiveness Index, p. 7.

17. Bureau o National Aairs, Aspen InstituteSays U.S. Companies Will Provide Moreraining in 21st Century, Daily Labor Report(March 6, 2003), http://www.aspenwsi.org/Publications/WSI-DailyLaborRpt.pd.

18. Deloitte and Te Manuacturing Institute,Boiling Point? Te Skills Gap in U.S. Manu-acturing(October 2011), pp. 1, 9 & 11.

19. Deloitte and Te U.S. Council on Com-petiveness, Ignite 2.0: Voices o American

University Presidents and National LabDirectors on Manuacturing Competitiveness(August 2011), p. 22, http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_auto_Ignite2_111711.pd.

20. Deloitte and Te U.S. Council on Com-petiveness, Ignite 1.0: Voice o AmericanCEOs on Manuacturing Competitiveness(January 2011), p. 28, http://www.compete.org/images/uploads/File/PDF%20Files/Ignite_1-0_FINAL_02.14_.11_.pd.

21. QS opUniversities, 2010 QS Asian UniversityRankings: a Case o Quantity over Quality orMainland Chinas Universities?, http://www.topuniversities.com/university-rankings/asian-rankings/2010-qs-asian-university-rankings-case-quantity-over-quality-main.

22. Deloitte and Te Manuacturing Insti-tute, Unwavering Commitment, p. 3

23. Georgetown University Center on Educa-tion and the Workorce, Whats it Worth:Te Economic Value o College Majors,by Anthony P. Carnevale, Je Strohl and

Michelle Melton (May 2011), pp. 74-82,http://www9.georgetown.edu/grad/gppi/hpi/cew/pds/whatsitworth-complete.pd.

Endnotes

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24. It is important to note that the recommenda-tions were not consistent between stakeholders.While many agreed on a number o topics,there were some dierences between cohortsand these represent recommendations out-lined in one or more o the Ignite reports.

25. Deloitte and Te U.S. Council onCompetiveness, Ignite 2.0, p. 18.

26. Gray, J. V., B. omlin, and A. V. Roth,Outsourcing to Contract Manuacturers:

Te Eect o Power and Path-DependentCosts, Production and Operations Man-agement(18[5], 2009), 487-505.

27. German Federal Ministry o Educationand Research, he High ech Strategy orGermany(Bonn, 2006), http://www.bmb.de/pub/bmb_hts_en_kurz.pd.


29. Deloitte and Te U.S. Council onCompetitiveness, 2010 Global Manu-

acturing Competitiveness Index.30. Deloitte and Te U.S. Council on

Competiveness, Ignite 2.0, p. 31.

31. Te Manuacturers Alliance/MAPI and TeManuacturing Institute, Te ide Is urning:An Update on Structural Cost Pressures FacingU.S. Manuacturers (November 2008), p. 1,http://www.mapi.net/Structural_Costs/Docu-ments/Structural_Cost_Study___2008.pd.


33. Te ax Foundation, National and State Cor-porate Income ax Rates, U.S. States and OECDCountries, 2011, January 14, 2011, http://www.taxoundation.org/taxdata/show/23034.html.

34. Deloitte and Te U.S. Council on Com-petitiveness, 2010 Global Manuactur-ing Competitiveness Index, p. 33.


36. Daniel Karnis, Navigating the R&D axCredit,Journal o Accountancy(March2010), http://www.journaloaccountancy.com/Issues/2010/Mar/20092122.

37. National Bureau o Economic Research, DoStronger Intellectual Property Rights IncreaseInternational echnology ranser? EmpiricalEvidence rom U.S. Firm-Level Panel Data,by Lee G. Branstetter, Raymond Fismanand Fritz C. Foley (July 2005), http://www.people.hbs.edu/oley/IPRReorm.pd.

38. National Export Initiative, Report to the Presi-dent on the National Export Initiative: Te Ex-port Promotion Cabinets Plan or Doubling U.S.

Exports in Five Years (Washington, D.C., Sep-tember 2010), p. 1, http://www.whitehouse.gov/sites/deault/les/nei_report_9-16-10_ull.pd.

39. Deloitte and Te U.S. Council on Com-petiveness, Ignite 1.0 and Ignite 3.0

40. Deloitte and Te U.S. Council on Competive-ness, Ignite 1.0, p. 21; and Ignite 3.0: Voice oAmerican Labor Leaders on ManuacturingCompetitiveness (December 2011), p. 9, http://www.compete.org/images/uploads/File/PDF%20Files/Ignite_3.0_FINAL_.pd.


42. China plans dra immigration law, (Xi-nhua), 16:53, China Daily, May 22, 2010

43. Gita Wirjawan, China: A Catalyst or In-rastructure Development, Te Jakarta Post(May 7, 2010), http://www.thejakartapost.com/news/2010/05/07/news-analysis-china-a-catalyst-inrastructure-development.html.

44. U.S. Council on Competitiveness, Drive.Private Sector Demand or Sustainable EnergySolutions A Comprehensive Roadmap to

Achieve Energy Security, Sustainability andCompetitiveness (September 2009), http://www.compete.org/images/uploads/File/PDF%20Files/CoC_-_DRIVE._Private_Sector_Demand_or_Sustainable_Energy_Solutions,_Sept09_.pd.

45. ASES Green Collar Jobs report orecasts37 million jobs rom renewable energy andenergy eciency in U.S. by 2030, Americansolar Energy Society, http://www.ases.org/index.php?option=com_content&

view=article&id=465&Itemid=58

46. Deloitte and Te U.S. Council on Com-

petiveness, Ignite 3.0, pp. 19 & 30.

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