By: Stephen Waguespack
Ready for some good news?
In a world dominated by gloomy economic projections, combative political storylines, and unsettling international developments, it is helpful to periodically focus on some good news. The hard-fought resurgence of American manufacturing is one of those stories.
The country is celebrating National Manufacturing Day on October 2. Throughout this week our team at the Louisiana Association of Business and Industry (LABI) will be personally visiting many of our manufacturing members to highlight their work, the high-paying jobs they offer, and their contributions to the community and our state.
In addition, LABI will be hosting a panel event this Friday in Baton Rouge to help connect these great opportunities to our own Louisiana students and job seekers. Panelists will include representatives of the Louisiana Workforce Commission, Louisiana Economic Development, the state’s FastStart program, the Louisiana Board of Regents, and the Louisiana Community and Technical College System as well as the Manufacturing Extension Partnership of Louisiana. They will discuss the free and customizable resources available for manufacturers to assist in recruiting, training, and developing the workers they need to operate and flourish in Louisiana. The event is open to the public and you can register online here or watch the event stream live at www.labi.org.
The National Association of Manufacturers (NAM) estimates that manufacturers contribute more than $2 trillion annually to the national economy – a number that is steadily on the rise since 2009. The sector accounts for 12% of national GDP. For every $1 spent in manufacturing, another $1.37 is added to the economy – the highest multiplier effect of any economic sector according to federal data.
Manufacturers in the United States are the most productive in the world, far surpassing the worker productivity of any other major manufacturing economy, leading to higher wages and living standards. American manufacturers perform more than 2/3 of all private sector R&D, driving more innovation than any other sector according to federal data.
NAM estimates that Louisiana manufacturers account for 23.4% of the total output of our state and employ 7.4% of our workforce. Total output from manufacturing in Louisiana was $59 billion in 2013. In addition, there were 147,700 manufacturing employees in the state in 2014 with an average compensation of $79,109. This figure compares quite favorably to the average annual compensation of non-farm businesses in Louisiana, which stands at $43,317.
There are 2,997 manufacturing firms in Louisiana. The largest manufacturing sector in Louisiana is petroleum and coal products ($23 billion annually) closely followed by chemical products ($22 billion annually). After that, other critical job creators such as those employers in food and beverage, machinery, fabricated metal, paper, and transportation products all make up the top Louisiana manufacturing sectors.
Manufactured goods are largely behind Louisiana’s export growth. Between 2009 and 2014, NAM estimates that the growth in manufactured goods exports in Louisiana increased 147%.
The business climate matters to manufacturers in Louisiana. In addition to abundant affordable natural gas, manufacturers point to Louisiana’s competitive tax incentives for new manufacturing operations, strategic investments in site identification, access to national and international markets, and targeted workforce training programs such as FastStart as key to Louisiana’s manufacturing renaissance. These efforts have led to the recruitment of economic game changers such as Nucor in southeast Louisiana, Benteler Steel/Tube in northwest Louisiana, and Gardner Denver in northeast Louisiana. Expansions of manufacturing companies abound from BASF to Dow, Exxon and Praxair and more.
Baton Rouge (#2), New Orleans (#3), Lake Charles (#4), and Shreveport (#7) all rank on the Top Petrochemical Manufacturing Locations in the South according to Southern Business and Development magazine. When total manufacturing is considered, Baton Rouge rises to the top, surpassing Houston, with 30 projects between 2010 and 2014. New Orleans comes in at #3, and Lake Charles at #4.
A number of manufacturing positions receive Louisiana’s five-star rating for high-demand, high-wage jobs, such as Industrial Production Managers, Industrial Engineering Technicians, Industrial Machinery Mechanics, supervisors of production and operating workers, machinists, welders, and inspectors and testers. Only one of these jobs requires a four-year degree, and most simply require an applicant to have technical training and a high school diploma.
This is all good news, though there are some warning signs ahead. One concern is that manufacturing growth nationwide appears to be leveling off far below pre-recession levels. Growth in the past year is only 1.7% nationally. The U.S. Chamber points out this trend tracks other sectors of the economy, which they call “the Obama recovery.” Federal policies on taxes and regulations – such as the numerous EPA rules affecting manufacturing – as well a national skills gap are holding back further growth in manufacturing across the country according to NAM. The EPA’s ozone regulations alone are expected to cost Louisiana more than $11 billion in gross state product loss between now and 2040, 34,000 lost jobs, and $43 billion in compliance costs.
Threats here at home in Louisiana jeopardize manufacturing growth as well. The Legislature temporarily reinstated a one percent utility sales tax and permanently reduced the state’s inventory tax credit by 25 percent this year – directly affecting the same projects creating high-wage manufacturing jobs in Louisiana. There are smarter ways to maintain government’s priority services that will not threaten economic growth in one of the state’s most important industries.
We must not ignore the warning signs. We cannot allow excessive regulation and unhelpful tax policy to tear down the resurgence of American manufacturing. The 1980’s began a slow, but alarming, exodus of American manufacturing jobs and it has taken us quite a while to reverse that trend. In recent years, we have finally begun to see tangible signs that our efforts are paying off.
We fought too hard over the last decade to bring those great jobs back to our shores and the last thing we need to do is chase them away again. This week, learn more about the great job opportunities that exist in manufacturing and all of the societal benefits this vital economic driver provides to communities all across Louisiana.