MCSG Meeting, Ron Bullock, Bison Gear The Future of Manufacturing in the United States How the skills gap and structural costs impact job creation in the

MCSG Meeting, Ron Bullock, Bison Gear

The Future of Manufacturing in the United States

• How the skills gap and structural costs impact job creation in the Midwest states


Bison Gear & Engineering Corp.

• Founded in 1960, manufacturer of electric motors and gearmotors used in a wide variety of OEM equipment

• One in seven of our associates has an engineering diploma, we emphasize life-long learning and continuing education

• We depend on innovation in products and processes to keep us globally competitive:

since 2000, productivity up 30% and sales growing at pace to double every five years

• Innovate, or Evaporate!


Challenges

• Health Care costs escalating at 15% per annum and currently average $10,000 for each Bison associate– We could hire 3 Chinese engineers or 8 Vietnamese factory

workers for just what we spend on Health Care for each employee

• Our education system is woefully inadequate in preparing young people for careers, particularly in STEM areas– Great career paths available in manufacturing– Bison electromagnetic engineering position took 18 months to fill – Industry spends $80 Billion annually on training, half on remedial

education (8th grade shop math test wipes out 60% of candidates at Bison; all candidates have HS Diplomas or GED)


Fast Facts on Illinois’ Jobs Climate

• Illinois ranks 48th in job growth. Since 1995, our rate of growth has been just 4.8 percent. We lag behind just Ohio and Michigan.

• Illinois’ ranks 41st in Gross State Product, and represents 4.5 percent of the nation’s GDP. Iowa ranks first in growth, with an astounding 11.6 percent increase from 2003 to 2004.

• Illinois has the 8th highest unemployment tax in the nation – the 6th highest taxable wage base, and yet in terms of solvency of our UI system, have the 50th trust fund balance

• In January 2003 there were 734,200 Illinois workers employed in manufacturing. By June 2006, that number had dropped to

678,200.


Illinois Education System

The dropout rate among high-school aged youth nationally is at 10.3 percent. However, Illinois’ statewide rate is 18 percent and higher (46 percent) in the Chicago Public Schools. In fact just six percent of incoming high school freshmen in CPS are expected to obtain a four-year degree versus 20 percent of their classmates statewide.

• In recent history/social science certification tests given to teacher candidates, just 50 percent could pass it.

• Inexplicably, the State Board of Education lowered the passing score. Now 82 percent of teaching candidates will pass the test.


The Death of Distance

• Beijing, Bangalore and Bridgeport are now neighbors from a global competition standpoint

• China targeting our manufacturing jobs– China’s non-performing bank debt approaching $1

Trillion, Yuan is 40% undervalued – China reported to be graduating 350K engineers to

our 70K annually– Internet Auctions put “Commodity” production at risk


Key trends of importance to the business community

• The Worker Gap: For the past 20 years, businesses have relied on the dramatic growth of the native-born workforce to find an ever expanding supply of new workers. That growth is over. The native born workforce grew by 44% over the last 20 years; it will grow by 0% over the next 20 years.


Key trends, cont’d

The Stagnation of Educational Achievement: The level of educational attainment of the American workforce is stagnant at best; it may be in decline. For the first time in decades, the United States no longer leads the world in the rate of college completion. A skilled workforce is required to support innovation.


Key Trends, cont’d

The Demand for Skilled Workers Outpaces Supply. While educational attainment is projected to languish over the next fifteen years, jobs requiring at least a 2-year degree are expected to grow at 40%. Labor shortages in math, science, and technology fields will be the most severe.


Key trends, cont’d

The Global Race: While educational attainment levels are sluggish in the U.S., our international competitors are gaining significant ground.


The Adult Workforce Challenge

• our competitiveness will be crippled by low education levels in the workforce and is concentrated in the population aged 25-34. The OECD survey of 30 industrialized nations reports:

• Adults 45-65 with H.S. diploma U.S. ranks #1• Adults 35-44 with H.S. diploma U.S. ranks #5• Adults 25-34 with H.S. diploma U.S. ranks #10


The Chinese are coming and the Boomers are going!

• We have compelling demographics facing us: 50% of the people employed in STEM careers and 67% of teachers in STEM curricula will be retiring in the next decade

• The seed corn will soon be depleted, the time to act is now

• NSB Commission on 21st Century STEM Education empanelled, help us on implementation


The National Summit on Competitiveness

• 12/6/05, 50 CEO’s and University Presidents, 4 Cabinet Secretaries and Key Congressmen met at the Commerce Department to refocus our leadership strategy on U.S. Innovation

• Out of this came three recommendations to revitalize fundamental research, expand the innovation talent pool and lead the world in development and deployment of advanced technologies.


Revitalize Fundamental Research

• Increase federal funding by 10% per year over the next 7 years with focus on physical sciences, engineering and mathematics

• Allocate >8% of Federal Research Agency funding to discretionary high-risk, high-return research


Expand the Innovation Talent Pool in the United States

• By 2015, double the number of STEM baccalaureate grads from 200K to 400K.

• Dramatically increase and improve K-12 Math and Science Teachers

• Reform US immigration policies

• Provide incentives for public/private partnerships to encourage US students at all levels to pursue STEM careers


Lead the world in the development of advanced technologies

• Provide focused and sustained federal funding to address national security and assure continued US leadership in:– Nanotechnology– High-Performance Computing– Energy Technologies


American Competitiveness Initiative

• ACI part of President Bush’s State of the Union Address, with specifics unveiled in February, 2006

• Adds $5.9Bn in 2007 budget– $1.3 Bn in new Federal R&D funding– $4.6 Bn in R&D Tax Incentives

• Total Federal R&D spending increased to $137Bn, up 50% since 2001, biggest increase since Apollo project in 60/70’s


R&D, the Seed Corn of American Competitiveness

• With 5% of the world’s population, US accounts for one third of the world’s economic output

• Privately funded R&D is $212 Bn

• Combined with Federal research spending, the total is approaching $350 Billion, an amount equal to that spent by the other G-8 nations as a group


Education and ACI

• AP/IB: train 70,000 additional teachers to lead AP/IB math & science courses and tests passed by low income students from 230K to 700K ($122MM)

• Adjunct Teacher Corps: 30K math & science professionals as adjunct HS teachers ($25MM)

• Math Now for elementary and middle school students ($250MM)


Education & ACI, cont’d

• Establishes a National Math Panel to create a research base to improve instructional methods & materials ($10MM)

• Evaluates Federal Science, Technology, Engineering & Mathematics (STEM) education programs ($5MM)

• Includes Science assessments in No Child Left Behind (NCLB) accountability

• Community College Job Training Grants program increased to $150MM, targeting 160K workers trained


Immigration: a Nation of Busboys or Physicists?

• H1-B Visa reform needed to retain high percentage of foreign nationals being educated in STEM fields at our universities

• SKIL Bill introduced by Sen. Cornyn to reform H-1B and Green Card processes

• www.competeamerica.org for updates on education and legislation, plus state info on number of STEM degrees awarded

http://www.competeamerica.org/


FSC, ETI and AJCA

• Europeans consistently successful in appealing to WTO the form of tax breaks included in Foreign Sales Corps and Extra Territorial Income US Tax provisions, enacted punitive tariffs on American goods

• FSC/ETI repealed and replaced with American Jobs Creation Act (AJCA), provides escalating exclusion of production income taxation of 3% in 2005-6, 6% in 2007-8 and 9% from 2009 and beyond


Could you be competitive if you cut your total labor cost in half?

• AJCA tax break limited to 50% of your total W-2 wages, - direct, indirect and salaried

• That means American job creation has a serious incentive behind it going forward


US Tax Policy encouraging capital investment

• Current tax reconciliation continues small business expensing of Capex up to $100K

• Capital Gains continued at 15%

• AJCA encourages capital investment in US as it is directly linked to job creation


Summing Up

• Get the education system reformed for STEM curricula and adult learners, help implement NSB 21st Century STEM Commission recommendations

• Assist manufacturers on research and investment with tax credits and centers of innovation, ease up on regulatory burden

• Establish win-win partnerships with industry in your states, such as the NAM’s Dream !t Do !t campaign, and watch the jobs engine perform

Documents

MCSG Meeting, Ron Bullock, Bison Gear The Future of Manufacturing in the United States How the skills gap and structural costs impact job creation in the