Manufacturing study shows structural costs continue sharp rise

By Plant Engineering Staff September 29, 2006

Structural costs for domestic manufacturers have increased from 22.4% to 31.7% since 2003, compared to nine major trading partners, according to a study released Wednesday by the National Association of Manufacturers, The Manufacturing Institute and the Manufacturers Alliance/MAPI.

The increase in costs is the major finding of “The Escalating Cost Crisis,” a new study by Jeremy Leonard, economist for MAPI.

“This is an astonishing increase from just three years ago,” Leonard said.

The corporate tax rate was both the highest burden in absolute terms and the largest contributor to the increase in structural costs, responsible for more than one third of the increase in the cost burden. While the corporate tax rate has remained the same since then, some trading partners have lowered their statutory tax rates, thus widening the gap and undercutting U.S. manufacturers.

“By standing still, the United States is falling behind,” Engler said.

“When we issued the original cost study in 2003, manufacturing was just starting to climb out of a severe three-year recession,” said Jerry Jasinowski, president of The Manufacturing Institute, the research and education arm of the NAM.

“To turn this tide, the NAM and its members are pursuing an aggressive agenda to enhance their ability to compete in the global marketplace,” Engler said.

Historically, natural gas prices have been a competitive advantage for U.S. manufacturers, costing on average 30% less than the nine major trading partners in the mid-1990s.

Pollution abatement costs have increased by 11.5 percent since 2000, to an estimated $77 billion in 2004, according to the study, increasing the U.S. excess cost burden by 1.7 percentage points relative to its major trading partners.