Taxpayer money has since flowed copiously toward the manufacturing sector. Just last July, the president was pushing for a 2013 budget with $11.245 billion in funding for various manufacturing initiatives, and that’s on top of existing programs and the stimulus money.
At first, it seemed to work. Manufacturing has boomed in the past three years, a rare occasion for optimism in the midst of a lukewarm recovery. Though the manufacturing sector faces a skill-set mismatch, it’s one of the few sectors with plentiful jobs available. Deloitte and the Manufacturing Institute reported last year that as many as 600,000 manufacturing positions remained unfilled.
Yet that growth is fragile, as recent news has demonstrated. For the first eleven months of 2012, inflation-adjusted manufacturing essentially plateaued, leading to speculation that the sector was re-entering a recession. The most recent data, collected in November, show that manufacturing remains short of what it was before the hard times hit.
And it’s hard to say which direction manufacturing is headed next, says Alan Tonelson, a research fellow at the U.S. Business and Industry Council, which represents some 2,000 small and medium-size manufacturers.
“We have come back a lot of the way, but we’re not back all the way,” Tonelson tells National Review Online. “And what I find discouraging about this is, we’re still behind the manufacturing eight-ball despite the trillions of dollars that have been poured into the economy by the stimulus and the Obama administration. It seems like that spending should have created much more growth for the buck.”
Even so, a recent survey by ThomasNet found that 48 percent of American manufacturing companies want to hire. But many of these companies will be affected by the new employer-mandate fees, which would certainly give them reason for pause.
Automation Systems Inc. is the perfect example. The employer mandate has made it financially untenable for the business to expand in the U.S., so Schanstra is reluctantly looking south of the border.
“I’m going to do what’s best for the company no matter what, so what jobs we have here, we can keep here,” he says. “As a business owner, I will learn the restrictions that the government imposes. But based on those restrictions, much of my business may no longer be within the country.”
Schanstra has already broken down the numbers: Even before the penalties, each employee costs nearly $11 per hour, once he factors in wages, worker’s comp, Social Security, and other expenses. In Mexico, a semi-skilled operator costs $3.50 an hour — “complete package.” Looking at the situation differently, Schanstra says, hiring a 50th employee would trigger $40,000 in added yearly costs. That’s the equivalent of almost two years’ salary for a low-skill Illinois worker.
Any way Schanstra does the math, he concludes that the Obama health law is going to cost American jobs.
Of course, moving abroad isn’t an option for every American manufacturing firm. But the employer mandate puts manufacturing companies stuck in the U.S. at an even greater disadvantage in the global marketplace.