Recent uptick in U.S. manufacturing has optimists hoping a lost decade that saw steep employment drops in the sector is coming to an end.
Productivity is up, a relatively cheap dollar is boosting exports, and the wage gap between the U.S. and China is shrinking. Some companies are repatriating operations from overseas.
But a huge portion of U.S. manufacturing, as much as 40% , hangs on a knife's edge and could either stay in this country or go elsewhere in the coming years based on policy decisions, according a study by the Tauber Institute for Global Operations and consulting firm Booz & Co.
How the U.S. shapes education policy, worker training, the tax code, the regulatory environment, and its relationship with Mexico will determine whether manufacturing continues to rebound or spirals into permanent decline, say Michigan Ross professors Wally Hopp and Roman Kapuscinski, co-authors of the Booz study Manufacturing's Wake-Up Call.
The potential gains are huge, and manufacturing still is ripe for a rebound. U.S. factories produce about 75% of what the country consumes, according to the study. The right decisions by both business and political leaders could push that to 95%. The wrong decisions could drive it below 40%. Manufacturing directly accounts for 11%, or $1.47 trillion, of U.S. GDP. That rises to 15% of GDP when including economic activity directly linked to manufacturing.
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