The Outsized Benefits of U.S. Manufacturing

Posted by aburke on 02/08/2012

In a recent post on the Brookings Institute Up Front Blog, Howard Wial and Jonathan Rothwell of the Metropolitan Policy Program examined why manufacturing is such a critical pillar of the U.S. economy. The duo took aim at a recent New York Times op-ed by Christina Romer, the former chair of President Obama’s Council of Economic Advisors.

Romer had argued against policies aimed at improving U.S. industry, saying they are unjustified. Wial and Rothwell disagreed because they say the benefits of manufacturing run deep:

“there are large social benefits associated with innovation and manufacturing plays an outsized role in creating them. In so doing, manufacturing makes a disproportionate contribution to economic growth."

Wial and Rothwell believe that Romer failed to acknowledge one of the most important aspects of the manufacturing process: Research and development (R&D). According their post, “economists have estimated that R&D’s rate of return to the nation as a whole (not just to the companies that pay for it) is as high as 30 percent.”

In addition to the powerful innovation and monetary gains that stem for domestic R&D, manufacturing’s “outsized benefits” include the cultivation of a highly skilled workforce, and the attraction and retention of high-level engineers and other key industry professionals.

So what can be done on the state and local levels to improve American manufacturing?

Wial and Rothwell have a few common-sense suggestions:

“Desirable policies include improving the training of workers without four-year degrees, strengthening R&D tax credits, and expanding assistance to small and medium-sized manufacturers to help them improve their economic performance.”

The Alliance for American Manufacturing has long argued for a comprehensive national manufacturing strategy that will address much-needed revisions for America's tax, trade, infrastructure, and educational policies in order to restore industrial competitiveness.