PATCH: Uncertainty puts damper on manufacturing

Indiana’s manufacturers have overcome big challenges in recent years to post encouraging numbers. But one of their biggest challenges continues to dog them: uncertainty.

The “2017 Indiana Manufacturing Survey: Upgrading for Growth”—authored by faculty from Indiana University’s Kelley School of Business, commissioned by Katz Sapper & Miller, and promoted by the Indiana Manufacturers Association and Conexus Indiana—is designed to assess the state’s manufacturing industry and provide insights into management choices made by manufacturing companies across Indiana.

Generally, the news is good. Survey respondents suggest the manufacturing sector is continuing to rebuild from the effects of the recession years. Last year’s overall performance was reported to be up slightly from recent years, albeit still lagging 2012-2013 results. While profit margins tightened in the past year, they remained in positive territory as revenue and capital expenditures increased.

What’s really exciting is that respondents expect the good news to get even better. Eighty-eight percent say revenue should continue to increase, and 26 percent say they expect rapid market growth in the next three-year period.

Even with all this optimism, though, many manufacturers feel a chill in the air as a result of a lack of clarity surrounding a few big issues:

• Corporate taxes. As elected officials kick around what to do with taxes, manufacturers live in limbo. Sure, more than 60 percent of survey respondents believe a lower corporate tax rate is necessary for American manufacturers to compete, but many believe that, at this point, tax uncertainty is worse than a tax hike.

• Health care. The ongoing lack of clarity around health care has forced employers to dedicate outrageous time, energy and other resources to trying to stay current and anticipate where things are headed. As one survey respondent put it, “We need to be able to focus on our business rather than constantly being distracted by issues relating to the affordability and uncertainty of our employee health care.”

• Worker shortages. The problem is simple. Many manufacturers have more jobs than people to fill them. One solution seems to be emerging: A number of respondents are investing in automation to reduce their reliance on the available labor pool. While that might sound like a doomsday message for workers, it’s actually good news in the long run. This shift to automation should lead to enough business growth that, ultimately, more human workers will be needed.

• The image of manufacturing. Even as manufacturing goes high-tech and jobs prove to be more about technical knowledge than hard labor, a lot of young people seem to hold onto an image of manufacturing as a dirty, bruising and unskilled career path. This exacerbates the worker shortage by making it even harder to find needed workers.

So, how do we ensure that Indiana’s manufacturers can continue to contribute to the state’s economic strength? By encouraging our elected officials to end the uncertainty. Agree on a tax package. Resolve the health care debate. Help prepare workers for today’s manufacturing jobs and connect them to the jobs that await them. And help workers see the reality of modern manufacturing and the opportunities the sector can offer.

Indiana manufacturers have demonstrated that they’re willing to do their part to build the state’s economy by investing in their businesses and their communities. Now they’re looking to our leaders to do their part by providing the clarity needed to ensure that Indiana’s largest industry sector continues on a path of success.•

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Patch is partner in charge of Katz Sapper & Miller’s Manufacturing & Distribution Services Group.