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Special: U.S. Policies Connect Research to Manufacturing

Steel manufacturing (Library of Congress)

(Library of Congress)

Editor’s note: Science Business today is devoted to a report of a conference in Washington, D.C., “U.S. Manufacturing: Policies for a New Economic Reality.”

At a conference on U.S. manufacturing policy at the Brookings Institution in Washington, D.C., panelists urged stronger policies to more explicitly link scientific research to the factory floor, in order for the U.S. to become more innovative and to create more good jobs. But the panelists acknowledged U.S. manufacturers are becoming more efficient, so fewer manufacturing jobs will be created, and those jobs will likely pay less than the factory workers of just a few years ago.

The Obama administration has raised the profile of manufacturing in policy circles, said Phillip Singerman, associate director of innovation and industry services at the National Institute of Standards and Technology. The president, noted Singerman, “mentioned manufacturing 50 times in the last State of the Union address,” and listed factors influencing the health of manufacturing, such as trade, workforce quality, supply chains, and R&D tax credits.

Not a black box

Singerman also pointed out that “innovation is not a block box,” meaning that increases in R&D spending do not automatically translate into economic output. Gregory Tassey, NIST’s senior economist, used the same black-box analogy to describe current R&D policies, such as those in medical research. National Institutes of Health, Tassey said, spends a lot of money on basic science, but then leaves it to drug, biotechnology, medical device, and health care service companies to translate the discoveries into deliverables. Tassey said NIST goes beyond the NIH model to provide “technology platforms” to better connect innovative ideas to the factory floor.

Robert Atkinson, president of the Information Technology and Innovation Foundation, said the U.S. does well in basic science, but agreed with Tassey that translating those ideas into innovations for manufacuring has been a problem. He suggested emulating the Franuhofer Institutes in Germany that are more focused on applied science and engineering than basic research. “We have to get science and engineering back together,” said Atkinson.

The role of government in guiding development of U.S. manufacturing was a point of spirited debate in two of the panels. Democratic representative David Cicilline from Rhode Island said “manufacturing is central to our identity as a country,” and called for a national strategy for manufacturing. Cicilline’s recommendations included investments in infrastructure, through a national infrastructure bank, noting that the U.S. has historically supported oil and gas producers and agriculture. Cicilline also called for making the R&D tax credit more generous and permanent; it has been renewed annually as a temporary measure since 1981.

On the other hand, representative Don Manzullo, a Republican from Rockford, Illinois who co-chairs the House manufacturing caucus, said “there is too much government in manufacturing.” A few minutes later, however, he praised the work of the Argonne National Lab outside Chicago — part of the Department of Energy — and called for emulating the European Union’s approach (a top-down bureaucracy based in Brussels) for defining advanced manufacturing technologies.

In a later panel, Steven Rattner, who directed the Obama administration’s rescue of the American automobile industry, also expressed some reservations about too much government involvement. He said government should not be picking individual winners and losers among manufacturers. Rattner, who has a background in venture capital — he chairs the company managing New York mayor Michael Bloomberg’s personal and philanthropic assets — noted that venture capital and private equity is a difficult business, and urged government not to get involved in it.

“Manufacturing is innovation”

Rattner said government could play a role, but advised instead to focus on high-performance sectors, where the U.S. has a competitive advantage, and the workforce provides a high value-added component. He pointed to the information technology industry as one example.

Mark Muro, a Brookings Institution fellow, noted that “manufacturing is innovation,” not just a result of innovation. Muro said focusing on regional development will take advantage of synergies between R&D and production. He added that high-end services, such as design and finance, are dependent on the close proximity of manufacturing.

The focus on manufacturing jobs and benefits to workers filling those jobs took up much of the agenda. In working with the United Auto Workers during the auto industry rescue, Rattner found the UAW highly sophisticated in workforce issues, and willing to update work rules and cut back on ancillary benefits to save jobs. Rattner also found the auto industry had taken steps to boost its efficiency, which while good for the companies’ competitiveness, also meant the companies would need fewer workers once they regained their health.

Scott Paul, executive director of the Alliance for American Manufacturing, a collaboration between the United Steelworkers and steel manufacturers, said greater efficiency helped save the steel industry. “We now have the most efficient steel industry in the world,” Paul noted. Tassey added that improved productivity helps rather than hurts job prospects. Higher productivity leads to greater market share and expanding output, with the jobs that result higher paid and more stable.

Rattner also said that making the auto industry competitive in world markets changed the debate on workforce issues from one of labor versus management, to the U.S. versus its competitors: China, Korea, and Mexico. He told how the UAW protected the high wages of their current factory workers, but was willing to cut starting hourly rates by half for new hires. These lower wage rates, which translate to less than $30,000 a year, have now become the prevailing rates in the industry.

Thea Lee, deputy chief of staff at the AFL-CIO, agreed that labor and management have no option now but to work together, and not just on workforce issues. She said, for example, that the presidents of the AFL-CIO and U.S. Chamber of Commerce both agree the U.S. needs more spending on infrastructure. She recommended, however, emulating countries like Germany and Sweden that have high-tech and high-wage manufacturing, rather than competing solely on who as the lowest wage rates.

“It’s all about education.”

John Hazen White, president and CEO of Taco (pronouced TAY-ko) Inc., in Cranston, Rhode Island, sponsored the conference, and was the only manufacturer on the program. White told how Taco’s investment in workers’ education and training turned around the company’s fortunes.

Taco Inc., an 80 year-old, family-owned business with 500 employees in Rhode Island and Massachusetts, makes hydronics-based heating and air conditioning systems that use water as a heat-transfer mechanism. White said in the 1990s his company was in a tough financial shape, and needed to take a different approach to the way it did business. That different approach involved investing in a highly skilled workforce.

Taco’s employee education program begins with remedial English as a second language and extends to not only skills needed to do day-to-day jobs, but also to classes in art, music, and literature. Taco staff can also get an MBA degree. White took issue with people who said workers today don’t have the skills to do advanced manufacturing jobs. He called such statements “foolish and cowardly.”

White said Taco’s workforce has responded with a fierce loyalty to the company, which he now says is profitable. The average employee turnover in the industry, said White, is 16 percent, while at Taco, the turnover rate isless than 0.5 percent. Workers at Taco stay an average of 20 years with the company.

The educated workforce is also a wealth of good ideas for the company. White said that when he needs suggestions for improvements or changes, he asks those who do the work. “It’s all about education,” White added.

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