Manufacturers Should Think Local When Addressing the Workforce Crisis
No man is an island, and neither is any manufacturer. Indeed, local and regional ties have never been more important to the industry’s success, as companies seek to fill hundreds of thousands of open positions and secure a talent pipeline for the next decade.
That’s why building partnerships with local organizations, schools and leaders was a key topic at the Manufacturing Institute’s 2023 Workforce Summit in October.
- As MI President and Executive Director Carolyn Lee put it, “The current state of the economy calls for new ideas for solutions…. We’ll need to build more diverse talent pipelines and connect with our partners in the workforce ecosystem.”
The problem has changed: “The workforce challenges we are seeing are not transitory; they’re structural,” emphasized MI Vice President of Workforce Solutions Gardner Carrick. “Addressing these structural challenges are going to require local, regional solutions.”
- In this case, “regional” means approximately a 40-mile radius around a facility. Manufacturers should focus on sourcing the bulk of their workforce from this immediate area, said Carrick, since it is unlikely that workers outside of that radius would be willing to commute.
- Carrick noted that manufacturers will need other organizations to help their outreach. “We need to collaborate. This is not a problem that can be solved individually.”
Which partners? Manufacturers should seek out economic development boards, education partners and community-based organizations, as well as individual leaders within their local communities.
- “With every new partnership, identify the point person and the decision-makers,” Carrick advised. “Work with them to maximize the relationship. You want to build awareness and institutional memory of your company within that organization.”
- In addition, manufacturers can seek out regional chapters of the MI’s Heroes MAKE America, Women MAKE America and FAME USA initiatives—which help members of the military community, women and others find rewarding manufacturing careers.
Connecting industries: Manufacturers can also find partners within their industry sectors and create relationships with local schools.
- In another session at the summit, MI Director of Workforce Initiatives Pooja Tripathi pointed out that “A group of employers can sponsor a noncredit pathway—which is relatively inexpensive—at a community college, which can then use it to attract the workforce manufacturers are looking for.”
- Fresno Business Council CEO Genelle Taylor Kumpe added that manufacturers could work with high school counselors to challenge perceptions of manufacturing and the need for a four-year college degree. “We’ve seen internships and other short-term exposure programs work in attracting youth to the manufacturing industry,” she noted.
- Fresno Economic Development Corporation Vice President of Workforce Development Chris Zeitz gave general guidance on approaching industry partners: “Different manufacturers and organizations have different incentives and ropes to navigate. The speed at which different sectors like manufacturing, education and economic development boards make decisions and move can also vary.”
The final word: Caterpillar Foundation President Asha Varghese emphasized the importance of seeking local solutions for workforce challenges, a key element of the foundation’s efforts to strengthen communities nationwide. As she rightly noted, “A business cannot thrive unless the community is successful.”
Texas Rail Ports Closures Hit Economy
U.S. Customs and Border Protection has closed two critical rail ports in Texas in an effort to stem a surge of migration, according to CNBC.
What’s going on: Immigration authorities “announced rail operations would be halted at El Paso and Eagle Pass, Texas, beginning Monday in light of the surge of migrants crossing the border.”
- Officials said this temporary suspension of operations will enable the government to redirect personnel to assist Border Patrol with taking migrants into custody.
- “Collectively both railroads operate 24 trains daily at these crossings.”
Why it’s important: More than $200 million in goods, wages and transportation are lost each day the El Paso and Eagle Pass rail lines remain shuttered, according to Union Pacific.
- The closures are affecting international commerce, with mounting impacts on the agricultural, food, automotive, consumer goods and industrial commodity sectors, among others.
- A total of nearly 10,000 rail cars are being held on both sides of the U.S.–Mexico border, according to Union Pacific.
- “According to Bureau of Transportation Statistics data, El Paso and Eagle Pass accounted for $33.95 billion, or 35.8%, of all cross-border rail traffic from November 2022 – October 2023,” CNBC reports.
The backdrop: The developments come the same week Texas Gov. Greg Abbott “signed into law a measure giving state and local police authority to arrest and deport migrants caught crossing the border illegally,” according to The Wall Street Journal (subscription).
What we’re doing: The NAM is in communication with the White House, U.S. Customs and Border Protection and key Senate and House members on the issue, advocating for an immediate solution to the reopening of the rail ports.
- “Mexico is the United States’ largest trading partner, and enabling trade between the two countries is critical for North American economic competitiveness,” said NAM Director of Trade Facilitation Policy Ali Aafedt. “The NAM will continue to advocate for solutions that uphold our laws while also facilitating legitimate trade.”
NAM Goes All Out for Tax Priorities
The NAM is firing on all cylinders to accomplish manufacturers’ top tax priorities: restoring immediate R&D expensing, pro-growth interest deductibility and full expensing.
Time is running out, as Congress must act by early 2024 to allow manufacturers to benefit from these provisions for the 2022 and 2023 tax years. Here’s what the NAM is doing to reach the finish line and why it matters so much to the industry and to the economy as a whole.
What we’re doing: The Executive Committee of the NAM Board of Directors recently sat down with House Speaker Mike Johnson (R-LA) to emphasize the importance and urgency of these measures. The Executive Committee has also raised the issue directly with the White House, and the NAM’s members—90% of which are small and medium-sized firms—have been contacting legislators to urge immediate action since early this year.
- In addition, while pressing the case relentlessly with the White House and congressional leaders himself, NAM President and CEO Jay Timmons has met personally with House and Senate tax negotiators to make manufacturers’ case for these reforms.
- NAM experts have also hosted multiple briefings for key legislators and congressional staffers, featuring manufacturers who explained how the withdrawal of these policies has harmed their businesses.
- Ratcheting up the ante on air and online, the NAM has applied pressure publicly in key districts, running a new ad campaign urging congressional action that has garnered about 80 million impressions so far. It also launched an action center to help manufacturers contact their legislators and spotlight the numerous companies that will be hard hit if pro-growth policies are not reinstated.
Why it matters: All three of these tax provisions are crucial to manufacturers’ ability to innovate, invest in their employees and make the American economy more competitive.
- R&D: The U.S. is one of only two countries (the other being Belgium) that doesn’t permit immediate expensing of R&D costs, a vital incentive for innovation. China, on the other hand, gives companies a “super deduction” for R&D expenses.
- Interest deductibility: A recent tax policy change made it more expensive for manufacturers to make critical purchases for their facilities, by imposing a stricter standard for deducting interest. This is a particularly heavy burden for a capital-intensive industry like manufacturing, amounting to a tax on companies’ investments in their operations and workers.
- Full expensing: This provision allows companies to expense their equipment purchases in the year they are made, supporting manufacturers’ investments in their businesses. But the policy is set to be phased out soon and must be saved, as it is crucial for small and medium-sized manufacturers looking to expand their operations.
The last word: “Manufacturing is the backbone of America, and the NAM is going all-out to make sure Congress acts on these critical priorities,” said NAM Managing Vice President of Policy Chris Netram. “Right now, leaders on Capitol Hill need to hear from manufacturers in their communities with a simple, clear message—act on our critical tax priorities now.”
Take action: Congressional leaders, including Speaker Johnson, have recently pointed out a need to hear from more manufacturers. Lend your voice—check out the resources in the action center to learn more.
Wisconsin Aluminum Foundry Shifts Gears on Retention
Wisconsin Aluminum Foundry CEO Sachin Shivaram knew something had to change. It was 2021, and at one point that year, the turnover rate of new hires for his foundry’s finishing department reached 100%, hurting its on-time delivery rate to customers.
He was facing a business challenge that many manufacturers consistently cite as their number-one issue: workforce retention, along with recruitment.
Finding a solution: Tackling the issue required looking at all facets of WAF’s operations, including onboarding and training of new hires.
- “What we found was we weren’t giving employees the proper environment to train on a new job,” said Shivaram. “We were putting them on the shop floor and telling them to learn while you work.”
- This finding was underscored by a conversation Shivaram had with one of his employees, who had been with WAF for 25 years.
- “He said when he first joined, he had no idea what he was doing in the first six months,” said Shivaram. “He would clock in and just watched what other people were doing and tried to get by and be productive. He didn’t speak the language and just stuck it out. And I thought to myself, with that sort of confusion among new employees, they will just stop coming.”
Fast Forward grant: Recognizing that WAF needed to train new hires without burdening experienced employees or slowing down its operations, the company applied for a Fast Forward grant through the Wisconsin Department of Workforce Development in October 2021.
- Thanks in large part to the $194,000 it received, WAF created a training center where entry-level employees can learn foundry basics, gain finishing and production skills, improve their understanding of customer specifications and acclimate to the physical demands of the job.
- For employees whose first language is not English, the center provides full-time translators who speak Spanish or Hmong. The foundry also pays for English classes if employees want to take them.
The result? To date, WAF’s new hire turnover rate has dropped from 100% to 15%—an astonishing improvement.
Other benefits: For Shivaram, meeting the company’s retention challenge also means supporting employees “through their career cycle.”
WAF’s starting wage is roughly $25 an hour, plus a $1.25 shift premium. The foundry offers incentive plans, which give employees the opportunity to earn up to 5% additional pay. In addition, WAF pays $400 a month to anyone with young children to offset their expenses for child care—not just for formal day care but any child care expense.
- “We have about 100 parents on that program, and that is huge,” said Shivaram. “People consistently mention to me that is a reason why they stay with us.”
Education: Shivaram notes that for anyone who wants to go back to school, even if it’s not exactly related to their career path, WAF supports that and will pay for part of it.
Feedback: While WAF performs annual employee surveys across all departments to garner feedback, as well as formal check-ins, Shivaram says that informal engagement—whether it’s participating in a company-wide event, such as a golf outing or pizza party, having lunch with an employee or just catching up with someone while walking through the plant—is really what gives him a pulse on the foundry.
- “Informal engagement helps people feel valued because they feel like they have a connection with someone—a friendship even. That is hugely powerful,” he noted.
The last word: The Wisconsin Department of Workforce Development recently recognized WAF for its workforce retention efforts—particularly its retention of minorities and women, who had been underrepresented at the foundry.
- That’s no longer the case, Shivaram pointed out proudly—minorities now make up about 10% of WAF’s workforce, and the foundry now has 40 women on the shop floor.
- “Improved employee retention has had a direct impact on the success of our business and our customers. It’s nice to have someone validate that we’re on the right path,” he concluded.
From Moonshot to Reality: Syzygy Plasmonics’ Emissions-Free Reactor
Syzygy Plasmonics is out to disrupt the $1 trillion chemical-manufacturing value chain.
The Houston-based startup, which bills itself as a “deep decarbonization company,” builds fully electric chemical reactors that are powered by light rather than traditional combustion.
That difference, CEO Trevor Best told us, is what will lead to disruption.
The big picture: “Chemical manufacturing is a foundation of modern human society,” Best pointed out. “With petroleum, natural gas and air, [companies] are able to create a wide variety of critical products,” from fuels and fertilizers to textiles and pharmaceuticals.
- “But today, it’s difficult to abate carbon emissions in chemical manufacturing,” he added. “That’s the problem Syzygy is working to solve.”
The backstory: In 2016, Best and Syzygy co-founder Dr. Suman Khatiwada “were looking for something disruptive” to invest in, Best said. “We reviewed lots of publications from major universities, and one day we happened to read about something happening at Rice University. This [idea] just would not die. We could not find a reason why it wouldn’t work, but no one else saw it.”
- After three decades of research, Rice researchers Naomi Halas and Peter Nordlander had developed a new kind of photocatalyst—a material that uses light to speed a chemical reaction—capable of “substantially lower[ing] the temperatures required for industrial-scale hydrogen production,” according to the university.
- “We quickly realized no one had ever made an industrial chemical reactor that could do that,” Best continued. He and Khatiwada contacted the researchers and eventually purchased the rights to the technology.
- Soon after, Syzygy was born.
Breaking records: In 2018, Syzygy successfully duplicated the Rice researchers’ experiment with a microreactor—but the result wasn’t as efficient at creating hydrogen as Best and Khatiwada wanted.
- They continued to scale up their testing, and by 2022, thanks to an advanced, large-cell reactor, the technology could produce hydrogen at 75% efficiency, surpassing the efficiency of traditional industrial chemical reactors.
- “We’re now on par with best-in-class electrolyzers” in terms of hydrogen production, Best said.
Affordable and emissions-free: One of the best things about Syzygy’s reactor? It produces no emissions, a characteristic the company believes will help it reach its goal of removing one gigaton of carbon dioxide emissions from the atmosphere by 2040.
- Another selling point is that the reactor is made with low-cost, readily available materials. Earlier this year, Syzygy unveiled a six-foot-tall reactor—made of “low-cost steel and glass,” according to Best—at its industrial demonstration plant just outside Houston, where it runs every day.
- Capable of multiple types of chemical reactions, the reactor has drawn interest from multiple companies wanting to deploy the technology in their own operations. Syzygy already has signed several contracts.
Up next: The company plans to bring three separate reactions to market at once in the near future.
- In addition to being emissions-free, the three reactions cost less than their traditional-combustion-powered counterparts, by between 20% and 45%, according to Syzygy.
The last word: Syzygy doesn’t envision many limits in its future, said Best.
- “We see this thing going global,” Best said. “We’re talking to customers all over the world. … [In the beginning,] I thought I was crazy. This was a moonshot. But it has exceeded all our expectations.”
NAM Pushes for Sensible Clean Hydrogen Regulations
Manufacturers are working constantly to develop energy approaches that reduce emissions and promote sustainability—and hydrogen energy is an important part of that mix. But upcoming decisions from the U.S. Treasury Department may make it more difficult for manufacturers to achieve their goals.
That’s why the NAM has been advocating for guidance that implements a hydrogen tax credit in a manner that supports manufacturers’ investments in this technology.
The background: Through the Inflation Reduction Act, Congress established this tax credit, called 45V, to incentivize companies to develop, produce and use clean hydrogen.
- “Hydrogen is the Swiss army knife of decarbonization—you can use it for nearly everything you can use natural gas for,” said NAM Vice President of Domestic Policy Brandon Farris. “And this credit can be the most significant tool across the globe to bring down the cost of clean hydrogen.”
The problem: As the U.S. Treasury Department finalizes rules around the use of the tax credit, their decisions may undercut manufacturers’ ability to take full advantage of it. Three provisions in particular are at the center of the NAM’s advocacy.
Additionality: The Treasury Department is considering a policy called “additionality,” which would mean that only hydrogen power created through the use of new renewable energy would be eligible for the credit.
- Meanwhile, clean hydrogen energy created with renewable energy that is already on the grid would not qualify—a real problem as our permitting system can often take half a decade or more to add additional clean power to the grid.
- “We have a lot of renewables on the grid already to spur the hydrogen industry. Using existing clean generation should qualify for the credit,” said Farris.
Time matching: Treasury may also impose a provision called “time matching,” which would mean companies would only receive the tax credit if they produce hydrogen energy at the exact same time that they are producing renewable energy.
- According to Farris, this rule misunderstands the energy production process. A company might only produce solar power for a few hours during the day when the sun is shining, for example, but it could still continue to produce clean hydrogen energy overnight using the grid. Yet under the time matching rule, they would be unable to claim a tax credit for the full amount.
- “This provision would create such tight restrictions that it would chill investment and innovation,” said Farris.
Carbon capture: According to the IRA, clean hydrogen created using natural gas with carbon capture also qualifies for the credit.
- However, the IRA also says taxpayers applying for the credits should have a mechanism to demonstrate that their feedstocks are lower in carbon intensity—yet has not specified what that mechanism will be.
- “Taxpayers applying for the credits should be able to prove that their feedstocks have less carbon,” said Farris. “The law says the less carbon they produce, the higher the credit they should receive. We’re just asking for a mechanism that allows taxpayers to prove it.”
The bottom line: Investments in clean hydrogen energy could be a game-changer for America’s energy future, but only if manufacturers have the opportunity to make them. That’s why the NAM has been urging the Treasury Department to create a flexible credit that rejects the additionality and time matching provisions and provides a mechanism that supports carbon capture.
- “Hydrogen is one of the most promising decarbonization technologies available,” said Farris. “If we can make these changes, we can achieve greater hydrogen production and more significant infrastructure investments and expedite decarbonization efforts across hard-to-abate sectors.”
A New Project Translates Military Experience for Manufacturing Employers
Manufacturers have long sourced great talent from the military community, helping transitioning and former military members apply their skills to America’s most pressing manufacturing challenges.
Through the Manufacturing Readiness Project, the Manufacturing Institute is now making it even easier for military veterans to find excellent civilian careers—and for manufacturers to build an outstanding and talented workforce.
The project: The Manufacturing Readiness Project aims to make military experience comprehensible to civilian employers via a digital credentialing system.
- Military servicemembers are awarded digital badges—stored in digital wallets—based on their military occupation and the training they received, giving both them and future employers a clear way to understand how their military experience prepared them for a career in manufacturing.
The details: The badges include a range of certifications in areas like general safety, general quality and general maintenance.
- Each badge includes a number of additional micro-badges signifying levels and types of achievement. General safety, for example, includes micro-badges in fields like workplace safety, environmental inspections and emergency response.
- These badges are also aligned with more than 300 military occupation codes across all five branches of the military, thereby translating military experience into terms that civilian employers will recognize.
What it means: For the MI, the workforce development and education affiliate of the NAM, this project represents a critical opportunity to expand the military-to-manufacturing pipeline.
- Currently, the MI’s Heroes MAKE America program trains transitioning military personnel in manufacturing skills and works to connect veterans to opportunities in manufacturing.
- The Manufacturing Readiness Project will enhance this effort by providing an avenue for veterans and transitioning personnel to highlight their military experience and enter the MI’s military-to-manufacturing pathway.
Why it matters: This initiative is one of the first of its kind to combine the use of the newest labor market technology tools—Learning & Employment Records, digital badges and digital wallets—to help workers find employment.
- This project is designed to be scalable across military occupations and civilian industries, thus opening the door to a broader range of servicemembers, veterans and employers.
What to expect: The pilot launched on Nov. 13—and within the first few weeks, more than 400 total badges have been awarded to transitioning and former servicemembers.
- So far, the initiative has received vital support from a range of organizations, including Solutions for Information Design, Jobs for the Future, Hire Heroes USA, the Manufacturing Skill Standards Council and Walmart. Following the pilot, the MI looks forward to seeking even more partners across the industry.
Learn more: For more information about the Manufacturing Readiness Project and the MI’s Heroes MAKE America program, please contact [email protected].
Right-to-Repair Laws Harm Manufacturers and Consumers
So-called “right-to-repair” policies undo many of the federal and state laws designed to protect consumers and manufacturers—and they could result in “steep cost[s] to quality, performance, consumer safety, the environment and the broader U.S. economy,” according to a new NAM-commissioned study.
What’s going on: “The Economic Downsides of ‘Right-to-Repair,’” by Capital Policy Analytics’ Ike Brannon and Kerri Seyfert, finds that enacting right-to-repair laws could disrupt supply chains, leave manufacturers open to intellectual property theft, drive up costs for consumers and manufacturers and increase greenhouse emissions in the atmosphere.
- Right-to-repair policies, currently in place in more than 30 states, generally require manufacturers to make all tools, guides and parts required to repair their devices available to everyone, including independent repair outfits.
- A federal right-to-repair law “would ultimately alter how manufacturers operate their businesses, and there is no guarantee that consumers would benefit, as manufacturers would be forced to change the way their products perform,” according to the study.
Why it’s important: “There is a wide range of unintended and potentially harmful consequences that would arise if the most commonly introduced versions of ‘right-to-repair’ go into effect,” Brannon and Seyfert write.
- In addition to making product repair more difficult, such policies could drastically increase compliance costs for manufacturers and drive up prices for consumers.
A New Project Translates Military Experience for Manufacturing Employers
Manufacturers have long sourced great talent from the military community, helping transitioning and former military members apply their skills to America’s most pressing manufacturing challenges.
Through the Manufacturing Readiness Project, the Manufacturing Institute, the workforce development and education affiliate of the NAM, is making it even easier for military veterans to find excellent civilian careers—and for manufacturers to build an outstanding and talented workforce.
The project: The Manufacturing Readiness Project aims to make military experience comprehensible to civilian employers via a digital credentialing system.
- Military servicemembers are awarded digital badges—stored in digital wallets—based on their military occupation and the training they received, giving both them and future employers a clear way to understand how their military experience prepared them for a job and a career in manufacturing.
The details: The badges include a range of certifications in areas like general safety, general quality and general maintenance.
- Each badge includes a number of additional micro-badges signifying levels and types of achievement. General safety, for example, includes micro-badges in fields like workplace safety, environmental inspections and emergency response.
- These badges are also aligned with more than 300 military occupation codes across all five branches of the military, thereby translating military experience into terms that civilian employers will recognize.
What it means: For the MI, this project represents a critical opportunity to expand the military-to-manufacturing pipeline.
Read the full story here.
Reform PBMs, NAM Tells Congress
Pharmacy benefit managers—companies that were first established to manage the cost of prescription drugs—are now driving up pharmaceutical prices for employers and patients, the NAM told the House Committee on Energy and Commerce this week.
What’s going on: While manufacturers remain committed to providing health benefits to their workers, PBMs are “[c]ontributing to the increasing costs of health care,” said NAM Vice President of Policy Chris Netram on Monday, ahead of the committee’s markup of 44 pieces of legislation.
- These measures included the Protecting Patients Against PBM Abuses Act and the Medicare PBM Accountability Act.
Why it’s important: PBMs operate with a virtual monopoly, as just a few of them now control up to 89% of the prescription drug market, Netram continued.
- PBMs operate with limited federal oversight and frequently steer business toward pharmacy networks owned by their parent firms.
What should be done: Congress should pass legislation aimed at changing the PBM model.
- “The complex formulas and opaque business practices of PBMs must come to an end,” the NAM wrote in a social post Tuesday. “Congress must address PBM reform to increase transparency, ensure pharmaceutical savings are passed to the plan sponsor and patients and delink PBM compensation from the list price of drugs.”
In related news: CVS Health “will move away from the complex formulas used to set the prices of the prescription drugs it sells, shifting to a simpler model that could upend how American pharmacies are paid,” The Wall Street Journal (subscription) reports.