WASHINGTON — The U.S. may be at the beginning of a “manufacturing job renaissance,” but industry growth will only remain a “trickle” if new policies to incubate innovation are not put in place, according to fellows at The Brookings Institution.
Panelists on Wednesday said high-wage jobs are going to come to the U.S. through innovation, by both creating entirely new products and changing current products incrementally.
The Connect Innovation Institute and Brookings, both nonprofit think tanks, released partner studies about the importance of innovation in manufacturing and how lawmakers should best promote innovation growth.
These studies point out areas in which the U.S. can improve, including shared assets among businesses, greater network structures to link pools of innovators and a more streamlined way of connecting innovators with capital.
To grow the industry, manufacturers need to think about “expanding the pie” through research and development instead of keeping costs low and increasing profits, said Susan Helper, economics professor at Case Western Reserve University.
President Barack Obama’s recent economic policy has focused on bringing more manufacturing jobs to Americans. He has been touring the country, touting companies such as Master Lock that have “insourced” jobs from China.
Labor costs may be rising in China, but Erica Fuchs, assistant professor of engineering and public policy at Carnegie Mellon University, is still worried about companies outsourcing the supplies for their products. “They aren’t just low-cost locations, but low-tax locations,” she said.
Dan Breznitz, an associate professor at the Georgia Institute of Technology who specializes in global markets, said China’s strategy is to capture the supply chain with competitive tax rates so most products around the world originate there.
Other countries are becoming better at process innovation, Fuchs said, and the peril for the U.S. is if idea innovations also begin to occur abroad.
Irwin Jacobs, co-founder of Qualcomm and No. 782 on Forbes list of world billionaires, said infrastructure and knowledge are more reasons companies consider outsourcing to countries such as Taiwan. The specific expertise about materials such as glass and LCD screens make foreign countries attractive, he said.
Jacobs said the U.S. is lacking a trained workforce, specifically in engineering, and it is all because “K-12 education is a major problem that we have.” Qualcomm tried to do something about that deficiency by investing in High Tech High, a charter school with a project-based curriculum. Students go to study in research in math- and science-centered programs at college, which creates a more robust pipeline for U.S. jobs
Jill Biden, wife of Vice President Joe Biden, started a three-day tour Wednesday to highlight the role of community colleges to meet the workforce needs of manufacturers. Obama’s proposed budget includes $8 billion dollars for community colleges to train students for high-growth industries.
The administration also released a new plan to set the maximum tax rate on manufacturers at 25 percent in another effort to bolster business. The initiative, however, needs congressional approval, an unlikely prospect in an election year.
Fuchs said more significant reforms to the tax code are needed so the United States can compete with other countries. She said she hopes a lower corporate tax rate does not also mean a decrease in credits for innovation.
But decreasing taxes is not going to be enough, said Breznitz. “We have to come up with new services and products and continuously improve them.”
Jacobs said he thinks that lowering tax rates could help business that innovate, but “I’ve never met an entrepreneur who decided not to go into business because he would have to pay a higher tax rate later.”