US manufacturing is key to competitiveness

US competitiveness in the global economy is slipping. According to the IMD World Competitiveness Yearbook, the United States fell from its number one slot, mainly due to a dramatic slide in its Government Efficiency ranking, where it has fallen from 5th place in 2002 to 22nd today. And the World Economic Forum’s Global Competitiveness Report puts the US in 7^th place, down from 1^st in 2007.

If this isn’t worrying enough, 71 percent of more than 10,000 Harvard Business School alumni surveyed expect US competitiveness to decline over the next three years. In the World Bank’s Doing Business Report, the US ranks 4^th in terms of the ease of doing business, including a dismal 69^th place for the ease of paying taxes. And the Information Technology and Innovation Foundation puts the US second-to-last on the rate of progress on innovation-based competitiveness since 2000, ahead of only Italy.

But there is some good news: US manufacturing. Until recently, the industry had been in steady decline, but many signs now indicate that America is now in the midst of a historic manufacturing revival. But manufacturers are also facing a skills-gap, as workers are unprepared for the demands of this growing industry. Preparing tomorrow’s skilled workforce should be one of the Obama administration’s top economic priorities. Developing a long-term plan to train workers for new manufacturing jobs is vital to boosting US competitiveness.

There are several reasons for the growth in US manufacturing, but one of the main explanations is that outsourcing to low-cost countries is no longer as tempting as it once was. With labor and transportation costs rising in many of these countries, American companies are bringing work back to the US and foreign companies are more attracted to a cost-competitive US base as well. In addition, a natural gas boon will help make US energy costs some of the lowest in the world. Add to that the benefits of higher quality manufactured goods and state-of-the-art innovation capabilities, and the US has a fair chance of regaining its historical leadership in advanced manufacturing.

A recent study by the Boston Consulting Group claims that the US is indeed on course to regain its status as a global industrial powerhouse, suggesting that the manufacturing resurgence combined with boosting US exports could create between 2.5 million and 5 million jobs by the end of the decade. But meeting the challenges of this “manufacturing revival,” means closing the skills gap through more, and better-targeted, investment in education and training.

Three recommendations to support advanced manufacturing were proposed in July 2012 by a committee of the president’s Council of Advisors on Science and Technology. This multi-stakeholder committee, made up of business leaders, academics, and scientists, called on President Obama to make good on his promise to create an “economy built to last” by “enabling innovation,” “securing the talent pipeline,” and “improving the business climate.”

To build, attract, and retain talent, their report recommends an advertising campaign to promote manufacturing as an exciting career path. It suggests capitalizing on the skills of returning veterans, investing in community colleges, and creating partnerships between industry and these colleges, as well as promoting manufacturing fellowships and internships.

These are all key steps, but policymakers and the manufacturing industry should also encourage workers to re-focus their career choices toward high value-added, knowledge-intensive manufacturing. And America must shore up its educational curriculum in the areas of science, technology, engineering, and mathematics. Supplement this with more technical training during and after high school. The US must also continue to decrease student drop-out rates and keep working to improve the quality of high school education.

Despite the fact that more than half of the world’s 100 leading universities are American (and 8 of the top 10), American high school graduates rank poorly in international test scores: American 15-year-olds ranked 25^th in mathematics, 14^th in reading, and 17^th in science (out of 34 countries) on the Organisation for Economic Co-operation and Development’s (OECD) Programme for International Student Assessment (PISA) rankings. No American president should sleep well with these results.

Since many experts acknowledge that advanced manufacturing is the best bet for creating high-paying jobs, with the additional advantages of contributing to innovation and reducing the US trade deficit, Mr. Obama would do well to heed the advice of his council. Education and training are critical to providing an appropriately skilled workforce that will ensure long-term sustainable growth and restore the US lead in competitiveness indices.

But more important than rankings, investing in the skills of the American people will put struggling lower and middle class Americans back to work. And with the US unemployment rate still hovering just below 8 percent, that’s an objective worth fighting for.

Dr. Suzanne Rosselet is a research fellow at IMD business school in Lausanne, Switzerland. She specializes in world competitiveness and holds a degree in economics from Stanford University. She previously served as deputy director of IMD’s World Competitiveness Yearbook.