Should We Invest in Manufacturing?

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Two important economic trends that left an indelible mark on the current decade now seem to be moving in reverse: A steep trade deficit and the job losses of the recent recession. The economy is on the move again, and while real wages have yet to increase (which in turn will increase consumer spending), the worst seems to be behind us.

In addition, a few significant trends seem to bolstering prospects for domestic manufacturing, including a reduced passion for offshoring as developing economies pick up pace. Overseas, salaries are rising, environmental protections are tightening, and as a result, the business climate is slowly shifting to resemble the climate in the US, which reduces incentives to move facilities elsewhere. Tax reform is also taking shape, and within the next few years, businesses may see greater tax benefits by keeping their operations on domestic shores.

Many economists on both sides of the political aisle link the health and well-being of American manufacturing to the health and well-being of the economy at large. So how will the larger economy be influenced by events that generate a boom for this specific industry? The answer has yet to be determined, but many powerful voices within the industry are making the case that federal and state governments should reprioritize tax cuts and other incentives for manufacturing startups and established companies.

If manufacturing enterprises are bolstered by public funds, so the logic goes, business owners will be better able to raise wages. When this happens, the middle class will expand, production will increase, and manufacturing innovations will thrive. As innovation rises, so will growth, expansion, and new jobs.

On the other side of the argument, many claim that a diversion of public funds into an already well supported industry with rapidly rising profits will actually harm the middle class. According to this logic, roads, bridges, schools, public water treatment, and food production all benefit equally well from tax cuts and subsidization. And bolstering manufacturing profits at the expense of the public good will harm both the middle class and the manufacturing industry in the long run.

If you’d like to weigh in on the future of the industry, contact the staffing and business management experts at CSS.

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