Making it in Mississippi: Manufacturing growing in the Magnolia State

By: Dennis Seid, Business Journal

Jay Moon, the president of the Mississippi Manufacturers Association, said “Made in Mississippi” is making a comeback of sorts.

“I think no question that manufacturing is up substantially over the past few years, and I do think it will increase even more over the next few years.”

Moon said the election of President Trump is the catalyst, describing the new administration as “very pro manufacturing.”

“What’s been done in first 100 days has been the removing of some of the onerous, costly regulations on manufacturing. That makes a big difference.”

According to a study commissioned by MMA and compiled by the National Strategic Planning and Analysis Research Center (NSPARC) at Mississippi State University, manufacturing in the state is projected to “remain steady” over the next few years.

In 2010, the state had some 140,000 manufacturing jobs – down from more than 203,000 in 2000. In 2020, the number of jobs should reach about 150,000. That’s still 25 percent fewer jobs than at the turn of the century, but it’s still a gain of about 10 percent over the bottoming out the sector faced during the recession.

About 11 percent of the state’s workforce is tied to manufacturing, compared to about 8 percent nationwide.

In Northeast Mississippi, manufacturing now accounts for about a quarter of the jobs in the region. In 2000, that figure was closer to about 33 percent, or a third of all jobs.

Moon’s and manufacturers’ optimism for the future come after years of what they call a burdensome, over-regulated environment during the past few years. They argue that jobs have been lost overseas because of stiffer competition stemming from lower labor costs and fewer handcuffs on international companies to conduct business.

Their feeling is that a pro-business administration will work in their favor.

“Another issue manufacturers face is the cost of energy because of an increase of natural gas,” Moon said. “Now with release of new pipeline construction in the U.S., I think we’ll also see more energy independence. And a large part of our deficit is because we buy a lot of foreign oil on credit. The new pipelines will help us move away from that.”

Since manufacturing uses about a third of the energy in the U.S., having more domestic energy sources is key to offsetting the lower cost advantages in Southeast Asia and Eastern Europe, Moon said.

TAX REFORM

Another development that manufacturers have been eager to embrace is tax reform.

Moon called it a “front-burner” issue.

“We have some of the highest corporate tax rates in the developed world,” he said. “If enacted, then I think the scenario is than manufacturing can come roaring back in the U.S. We’re already seeing some signs of that. We’re still the most desirable market.”

Repatriation of overseas earnings is another key issue.

A repatriation tax occurs when money earned overseas is transferred back to domestic accounts. This taxable event must occur before any money can be spent or invested domestically in the U.S..

Right now, capital that is repatriated from overseas subsidiaries is subject to the U.S. corporate tax rate of 35 percent. According to critics, this has provided a barrier for companies that want to bring foreign money home, and Trump has proposed to lower that to 10 percent.

“If we come back with repatriation with a fair rate, then we get a lot more resources available to work with,” Moon said. “It allows us to work on new products, on infrastructure, facilities, etc. I think all of that will create a wonderful environment for a manufacturing resurgence. We still have some work to do to achieve that, but it’s a good opportunity

WORKFORCE CHALLENGES

While Mississippi’s manufacturing sector is relatively diverse, there are still some critical issues to tackle, Moon said.

He acknowledged that improved technology has changed the dynamic and has been a cause of some of the losses in employment. Cheap labor is one challenge; new technology, including robotics, presents another bigger challenge.

“What’s happened in this period since the recession is that more manufacturers have begun utilizing a variety of technologies that will improve their productive capabilities,” he said. “And that’s a two-edged sword. First, the technologies require fewer workers, like robotics. But then we see a big spike in the kinds of workers necessary to support those new methods of production and to program them. So there’s a rise if you will of ‘data managers’ that’s critical in the new manufacturing scenario.”

Moon said bluntly, “What we have to do in this state is to produce a skilled workforce able to meet some of those new standards and requirements coming down the line.

“Six jobs are eliminated for every robot introduced. We’re in our infancy in our use of robots in this country. Other nations have higher utilization rates. We’re tryingt0 catch up, and costs are going down in the meantime. So more manufacturers are seeing an affect from this technology. But while there’s downward pressure on the number of workers, there’s an upward pressure on the skill sets needed.”

MANUFACTURING GROWTH

The NSPARC report said the U.S. economy would be “seriously compromised” without a strong manufacturing presence.

“Manufacturing is also the engine for sustaining innovation; it would be difficult for other industries to survive without equipment and products produced by manufacturing firms. Manufacturing has the highest multiplier effect across all major sectors, as its production processes create demand for materials and services across a broad array of industries such as finance, telecommunications, transportation, agriculture, and wholesale and retail trade. As a result, one in six private sector jobs depends on manufacturing.”

Moon said Mississippi’s manufacturing outlook is good overall

“Some of traditional industries will continue to do well – particular in Northeast Mississippi, furniture is doing very well,” he said. “People tend to forget that it represents some 20,000 people directly. Many companies are doing well and I expect them to continue to do well.”

A move to “reshore” more jobs to the U.S. has resounded somewhat in the furniture industry, which has the bulk of its employment centered in Northeast Mississippi. Higher wage rates in China, plus lower costs of transportation have made it more sensible to manufacture in the U.S., Moon said.

“The auto industry also has come on so strong in the last quarter-century,” Moon noted, citing Nissan’s and Toyota’s arrival in 2003 and 2007 respectively to the state’s portfolio of companies. The addition of Yokohama Tires in 2015 and Continental in the next few years, together with Cooper Tire already in place in Tupelo, will continue to develop over time, he said.

Mississippi’s diversity of manufacturing also is a positive, Moon said.

“We’re not in a situation like Louisiana and Oklahoma, where so much is based on oil and gas. We can withstand some of the pressures. I think of our growing aerospace industry, with a number of high-quality companies that are going to continue to develop. And anything to do with wood – paper, timber – continues to do well.”

The shipbuilding industry, which dominates manufacturing on the Coast, is poised to grow further with President Trump’s announced plans to expand the Navy.

“We’ve also been working with the legislature to develop a shipyard of the future, so the timing is perfect,” Moon said. “ Redeveloping it to meet the standards of the new navy. It’s very high tech, and I think we’re in perfect position. And there’s not that many shipyards left. It’s a good opportunity for us there.”

FAIR TRADE

Moon said manufacturers also are pleased to hear about Trump’s desire to review its trade agreements.

“Manufacturers have advocated for not only free trade, but fair trade,” he said. “Some trade agreements have not been balanced. We’re not seeking a massive competitive advantage. On the other hand, we are seeking a fair field of play so to speak. We want trade but want them one at a time, and not just one-size-fits-all deals.

“We will look at our trading partners around the world and won’t do something that’s an imbalance. If we have fair trade and businesses can compete on cost and quality without due restrictions, then we’ll have a better situation. We don’t want any negative impact on partners. We want open agreements, but they haven’t been reciprocated, so thats why there is this trade imbalance. We have to fix that on a case-by-case basis and get one that doesn’t disadvantage us.”


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