UMA ON THE HILL:
ATTACK ON PRIVATE CONTRACTS PASSES HOUSE: HB-73, Motor Carrier Transportation Contract Indemnity Agreements, cleared the House of Representatives late yesterday and is on its way to the Senate. This bill intends to disallow indemnity agreements in private contracts as they relate to common carriers. Unfortunately, this measure impacts a host of other contracts across the economy and meddles in terms of private contracts. UMA and other business interests have offered amendments to improve this bill but they have been rejected by the sponsor and the Utah Truckers Association. This is one of several bills before the 2011 legislature to dictate terms of private, business-to-business contracts. UMA opposes legislating terms of contracts.E-SCRAP BILL FAILS IN COMMITTEE: HB-102, H.B. 102 -- Electronic Scrap Recycling, presented in a House committee on Thursday morning failed to receive a favorable recommendation by a committee vote and failed to advance to the full house for consideration. This measure would impose fees on manufacturers whose electronic devices in Utah to fund a recycling program within the Department of Environmental Quality. UMA has opposed a mandatory program in favor of a voluntary effort by manufacturers.
RFID REGULATION BILL FAILS COMMITTEE VOTE THIS MORNING: HB-224, proposed to add an additional layer of regulation on RFID tags after they leave a retail establishment. Despite efforts by UMA and the Utah Retail Merchants Association to convince the sponsor that regulation of RFID technology is already covered under the Computer Crimes statute, the sponsor asked a House committee to approve it for consideration in the House. UMA testified against the measure on the grounds that anything that could negatively impact the use of this new technology by manufacturers would have a dampening effect on business in Utah. When the committee chair asked for a motion, following discussion and public testimony, there was a very awkward silence, as no one wanted to make a motion to address the House Rules Chairman’s bill. Finally, a freshman representative, made a motion to hold the bill. A substitute motion was then made to pass the bill out favorably. The motion to report the bill out failed and the original motion to hold passed. The bill will remain in the committee until the end of committee work.
HOUSE DEFEATS BILL TO MAKE STATE SCHOOL BOARD ELECTION DIRECT:The Utah House defeated HB264, a bill that would have made nonpartisan state school board elections direct. Now, a governor-appointed committee recruits and narrows the field of candidates to at least three for each seat, and the governor then chooses two of the three to appear on the ballot before voters. This is the process UMA helped to pass and implement several years ago to attempt to get business interest represented on the State School Board. The present system has sharply improved the board and it working. Formerly, the State School Board was mostly dominated by the teacher’s union (UEA). Efforts to change the way school board members are chosen is being lead by UEA who have been disappointed in the new process because they lost their control of the board. There are a couple other efforts to modify the way the State School Board is selected.
CONTROVERSIAL IMMIGRATION BILL CLEARS HOUSE OF REPRESENTATIVES: Representative Sandstrom’s highly touted punitive immigration bill was approved by the House yesterday and has been sent to the Senate for their consideration. It appears that most measures originating in the House will be passed and forwarded the Senate where an effort is underway to consolidate the ideas from many bills into one comprehensive bill.
UMA MEMBERS IN THE NEWS:
GENETIC IDENTIFICATION TESTING NOW OFFERED BY NELSON LABSDaily Pulse
Nelson Laboratories is now conducting genetic identification (ID) testing in-house using new equipment that performs the test more quickly, more efficiently and more reliably than other identification methods.
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USTAR FUNDS 11 PROJECTS IN LATEST ROUND OF TECHNOLOGY COMMERCIALIZATION GRANTS
Michael O'Malley, Marketing and Communications, USTAR
Yeast that captures heavy metals to clean mine waste, lasers that speed building construction and high-speed gene cloning that may help drug companies to develop lower-cost pharmaceuticals are among the projects funded in the latest round of USTAR Technology Commercialization Grants (TCGs).
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North American metals service centers' shipments of steel and aluminum rose sharply in January, as did inventory totals, suggesting some effort at stockpiling. Click to continue
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Proposed budget would fund 28 transit construction projects across the nation. Click to continue
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INTERVIEWING, ORIENTATION, I-9, FMLA - SMALL-GROUP WORKSHOPS FILLING UP!
Employers CouncilThere is still time to register for The Employers Council's remaining Small-group Workshops. Sign up now! Enrollment is limited to 13 registrants and the cost is just $69 per person!
Mar. 1: Effective Employment Interviews - http://ecutah.org/sminterviews.pdf 6 spots open
Apr. 5: Effective New Employee Orientations - http://ecutah.org/smorientations.pdf 7 spots open
May 3: Form I-9 Administration Basics - http://ecutah.org/smi9spring2011.pdf 8 spots open
Jun. 7: FMLA: Basic Administration Procedures - http://ecutah.org/smfmla.pdf 5 spots open
These two-hour, highly-interactive courses pare away the fluff and teach you how to apply a specific human resource or management skill in real-life settings. Each workshop is approved for two HRCI recertification credits. Enrollment is limited to 13 to maximize your learning experience and facilitate teacher-student interaction. At the bargain price of $69, our workshops always fill up quickly, so we strongly encourage you to register today! Contact our office or download the relevant registration form from the site listed above. Workshops are for Council members only. Note: Employers Council has extended an invitation to UMA Members.
Today in Manufacturing
More people applied for unemployment benefits last week, one week after claims had fallen to the lowest level in nearly three years ... continue
Today in Manufacturing
A big jump in food and gas costs pushed consumer prices up in January, but outside those volatile categories inflation was relatively tame ... continue
'U.S. MANUFACTURING...PAIN & PROMISE'
Jeff Thredgold's Tea LeafThe common wisdom emerging from the national media frequently notes that the American economy has lost its ability to “make things”…that we lost most of our manufacturing capability to China and to Mexico. The common wisdom notes that we have simply become a nation of hamburger flippers, as well as a nation where we merely trade information with each other.
The common wisdom largely adds the U.S. to other formerly powerful nations on the scrap heap of history, a nation whose best days are behind us. The facts are a bit different.
Job Losses
There is no question that employment losses within the U.S. manufacturing sector over the past 30 years have been massive. We all know a neighbor, a friend, or family member who lost their job in manufacturing, particularly in the industrial Midwest.
Total U.S. manufacturing employment peaked in 1979 at 19.6 million people. That total has fallen consistently and painfully to 11.6 million now…a loss of eight million jobs…a loss of 40% of all manufacturing positions.
The common wisdom notes that most of these jobs left in search of less costly havens, initially Mexico and then China. This is certainly true for a share of the jobs. However, the most important factor leading to lesser employment was major gains in worker productivity…we simply make more goods with fewer bodies. While overall U.S. worker productivity gains have run just under 3.0% annually over the past 10 years, productivity gains in manufacturing have run 2-3 times higher.
U.S. Ranking
It might surprise you that the U.S. continues to lead the world in manufacturing output. We produce more than the Chinese, the Japanese, the Germans, etc. U.S. output exceeds that of China by 40%
It might surprise you that the U.S. share of global manufacturing output, at 20%-25%, is essentially the same as it was 40 years ago
It might surprise you that output per U.S. worker is three times what it was in 1980 and twice as high as it was in 1990
Making a Comeback?
U.S. manufacturing employment actually rose by 136,000 net new jobs during 2010, the first annual increase since 1997. Moreover, the weather-distorted January 2011 employment data saw an estimated jump of another 49,000 jobs, the largest monthly gain in 12 years.
Various estimates suggest that the American economy will add 300,000-350,000 net new manufacturing jobs this year, a rise of roughly 3.0%. Longer-term estimates suggest the manufacturing sector could add one million jobs over the next 4-5 years. Such a rise clearly won’t make up for the loss of two million manufacturing jobs in the Great Recession, but it helps.
U.S. manufacturers have largely thrown in the towel on lower cost, lower skill, lesser profit margin manufactured products such as toys and electronics. At the same time, U.S. manufacturers have moved aggressively toward more complex and expensive goods requiring specialized labor, including health care products, jet fighters, computer chips, and industrial machinery (The Associated Press).
Outsourcing of Jobs
American companies have continued the exodus of former American jobs to other less costly parts of the world, although the pace has slowed. The rationale has also changed somewhat.
Hundreds of American firms had sent production and jobs to China, with products then shipped back to the U.S. to be sold. The current environment finds more and more of that production sold within China, or within other Asian nations. This change is identical to that of major foreign automakers who build billion dollar facilities in various communities within the U.S., with the intent of selling those cars not back home, but within the U.S. market.
“Onshoring” of Jobs
One very favorable development within the U.S. manufacturing sector involves decisions by more and more American companies to bring back production and jobs previously sent to China, Mexico, and other low cost production locations. Companies such as Ford, General Electric, and dozens of others have seen the costs of operations, particularly wages, climb dramatically across China while shipping costs have surged.
Issues of shoddy products and the theft of intellectual property have blackened the eye of outsourcing. The reality of too many midnight telephone calls and frequent trips halfway around the world to deal with problems has also taken its toll.
Another painful reality faces companies within the U.S. and from around the world with an interest in setting up production in China. The unspoken but understood fact that a company must typically give up its most sensitive trade and technological secrets to the Chinese in order to get in the door, as one might expect, muddies the water as well.
Many foreign companies have set up shop in China, only to then see products nearly identical to their own soon marketed by Chinese competitors, at substantially lower prices. The laundry list above has provided solid incentive for additional onshoring of jobs in coming years. Drug cartel violence across Mexico has also led hundreds of American firms to reconsider doing business south of the border.
Similar issues are at play in the white collar world of back office operations and call centers, where the American job shift to India has drawn great concern. Sharply higher wage costs and higher levels of worker turnover (note: these people are working during their nights to handle our daytime phone calls) have also led to some jobs coming back home. The emerging issue of cloud computing will also impact white collar outsourcing decisions.
“Rural” Outsourcing
More American companies based in large metropolitan areas are taking advantage of “outsourcing” some of their business operations to rural American communities, especially those where a university might be located. The rationale? Access to talented people with lower wage and housing costs, similar operating hours, and a common language come to mind.
Down the Road
The U.S. still accounts for 40% of total world R&D spending. We lead the world in science and technology, although that lead is slipping, according to the Rand Corporation.
Despite more recent successes, major challenges remain. Millions of lost jobs will never return. At the same time, ninety percent of manufacturers report having difficulty in finding skilled production workers. In addition, a large share of the manufacturing workforce will retire sooner rather than later, with the average U.S. manufacturing worker being 50 years old (The Agurban).
Greater cooperation between local universities, community colleges, and high schools to provide quality training for local manufacturers remains a challenge largely unmet. Parents and educators need to promote a career in manufacturing as a highly desirable outcome for tens of thousands of new graduates.
Issues remain…Opportunities abound
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PRESIDENT’S BUDGET PLAN FALLS SHORT FOR MANUFACTURERS
NAM Capital BriefingPresident Obama unveiled his fiscal year 2012 federal budget proposal on Monday, February 14. The $3.7 trillion proposal, including $357 billion in revenue raisers, is a mixed bag for manufacturers.
The NAM is encouraged by the budget’s support for a strengthened and permanent research and development (R&D) credit. The NAM is a leader in the R&D Credit Coalition and has long called for action to strengthen the credit and make it permanent. In particular, the NAM is advocating for a permanent incentive with an increase in the alternative simplified credit (ASC), a new credit formula, to 20 percent. While the President’s budget would increase the ASC to only 17 percent, this is the first time an Administration has supported strengthening the credit – a positive step in the right direction.
The budget also includes funding for the deployment of next generation broadband, a tax credit for energy efficient improvements to commercial buildings and an increase in basic research funding. The NAM has been a strong and vocal advocate of all of these provisions, which have the potential to stimulate jobs and economic growth.
Unfortunately, the support for R&D and other provisions is outweighed by tax increases on job creators. The proposal directly threatens economic growth by increasing taxes on virtually all manufacturers. It includes billions of dollars in tax hikes on U.S. companies with worldwide operations, including limits on deferral for overseas income, restrictions on the use of foreign tax credits and changes to the tax treatment of dual capacity taxpayers, among others. These provisions create a significant competitive disadvantage for American manufacturers. The NAM is at the forefront of efforts to block these proposals as a leader in the Promote America’s Competitive Edge (PACE) Coalition and is working with member companies and suppliers to help them communicate the potentially disastrous ripple effects of such changes.
Additionally, the proposal’s repeal of the last in, first out (LIFO) accounting method – which allows manufacturers to match their current sales revenues with current inventory replacement costs – would increase taxes for companies by than $50 billion over the next 10 years and would threaten capital investments and job creation. President Obama’s targeted tax increases on the oil, gas and coal industries would seriously weaken our nation's energy security by stifling the much-needed ability to increase domestic oil and gas production. The energy tax increases include repeal of the Sec. 199 deduction for income from domestic manufacturing activity for oil and gas companies, repeal of expensing for intangible drilling costs and repeal of the percentage depletion for oil and natural gas wells, as well as other tax increases totaling some $46 billion. These tax hikes will result in increased energy costs – a problem for manufacturers because they consume one-third of the nation’s energy -- and ultimately will hurt job creation.
Although the President’s plan would modify the 1099 reporting provision included in the 2010 health care reform laws, the proposed change would do little to alleviate the potential compliance burden for businesses of all sizes. Under the new reporting requirement, beginning in 2012, all businesses will have to file a 1099 form with the IRS for all purchases of property and services that cost over $600. The President’s proposal would limit reporting to all payments over $600 for services, a small change that would still leave many companies facing an administrative nightmare. The NAM has been steadfast in its opposition to this onerous rule and supports full and complete repeal of the 1099 reporting requirement. There is broad-based support in Congress for our position – the Senate earlier this month voted to repeal the provision. On Thursday, February 17, the House Ways and Means Committee advanced H.R. 4, a bill to repeal 1099, clearing the way for the bill to be considered on the House floor in March.
Overall, the President’s budget would reduce the deficit by $1.1 trillion over 10 years, with two-thirds of the reduction coming from spending cuts and one-third from tax increases. The proposal would increase federal taxes as a percentage of the budget from 15 percent in 2010 to 20 percent in 2021.
NAM URGES CONGRESS TO SUPPORT AMENDMENTS LIMITING ENVIRONMENTAL OVERREACH
NAM Capital BriefingIn a letter to Capitol Hill Thursday, February 17, the NAM urged members of Congress to stem the tide of the federal government’s overreaching environmental regulatory agenda. The letter urged support for provisions and amendments to the Continuing Resolution that would limit various federal environmental regulatory efforts. The letter highlighted the Environmental Protection Agency’s (EPA) damaging regulation of greenhouse gas emissions, stricter emissions limits on industrial boilers and the EPA’s efforts to regulate coal ash as a hazardous waste. In addition, the NAM highlighted the Department of Interior’s guidelines that have slowed the permitting process for offshore drilling activities.
MANUFACTURERS URGE SENATE TO SUPPORT MEP FUNDING
NAM Capital BriefingThis week, the NAM spearheaded an effort of more than 40 organizations representing tens of thousands of U.S. manufacturers and millions of employees and called on Congress to support funding for the Manufacturing Extension Partnership Program (MEP). The MEP is critical to the creation and retention of U.S. manufacturing jobs, and the federal funding for this program is essential to leveraging equal investments from both the state and local governments and client fees. In Fiscal Year 2009 this public/private program created or retained $8.4 billion in sales, allowed clients to make $1.9 billion in new investments and provided $1.3 billion in cost savings.
NAM PUSHES BACK ON LATEST EPA GREENHOUSE GAS ACTION
NAM Capital BriefingThe NAM, along with other trade associations, filed petitions on February 11 in two federal courts of appeal to review the Environmental Protection Agency’s (EPA) December 2010 decision to call in 13 state Clean Air Act implementation plans (SIPs) with respect to greenhouse gas permits. Rejecting comments filed by the NAM earlier, EPA decided that these state plans were “substantially inadequate” to regulate greenhouse gases because they do not immediately incorporate the new federal requirements. Until they do, EPA will impose its own Federal Implementation Plan (FIP). This new challenge is necessary to prevent the EPA from using multiple regulatory initiatives to implement restrictions on stationary sources of greenhouse gas emissions.
AGGRESSIVE ASBESTOS CLAIMS ARE STILL ACTIVE
NAM Capital BriefingThe Illinois Supreme Court is deciding whether to impose a new duty on manufacturers or other premises owners to prevent workers from accidentally exposing family, friends or others outside the workplace to certain hazardous substances. The NAM filed an amicus brief February 15 urging the court to reject such a new duty, as most other states that have considered the question have done. Illinois has experienced voluminous asbestos litigation for decades, often serving as a magnet jurisdiction for out-of-state claimants. Now is not the time to expand liability almost without limit.
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