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Illinois manufacturing gets glimpse of good news, but long road ahead

Illinois manufacturing gets glimpse of good news, but long road ahead

From ReBoot Illinois: Illinois added 1,600 manufacturing jobs in October, marking the first month since June the industry saw a modest gain, according to preliminary data released Nov. 17 by the Illinois Department of Employment Security.

The number of manufacturing jobs now stands at about 568,500, though the September figure was revised downward by 1,000, slightly dampening the gains posted in October.

A total of 8,600 manufacturing jobs have been lost since January and 10,000 compared to one year ago. Sean McCarthy, acting director of the Department of Commerce and Economic Opportunity, called last month’s increase in manufacturing jobs a “drop in the bucket.”

“High costs and competition from surrounding states continue to drain manufacturing jobs from Illinois. We saw several manufacturers move across the border to Wisconsin in October,” McCarthy said in a news release. “1,600 new manufacturing jobs is a start, but it is a drop in the bucket compared to the 10,000 manufacturing jobs Illinois has lost over the last twelve months – an average loss of nearly 200 jobs per week.”

Last month, four manufacturing companies announced plans to permanently close their plants and move operations to other states, affecting a combined 467 workers, according to October’s Worker Adjustment and Retraining Notification (WARN) report.

While the Great Recession significantly changed the manufacturing landscape throughout the country, the most recent data from the Bureau of Labor Statistics show neighbor states like Wisconsin, Michigan and Indiana are recouping manufacturing jobs at a much faster rate than Illinois.

Here’s the net number of manufacturing jobs added since the end of the Great Recession, or June 2009. With the 1,600 manufacturing jobs added in October, Illinois finally is beginning to inch out of negative territory.

Gov. Bruce Rauner and the conservative think-tank the Illinois Policy Institute have pointed to workers’ compensation insurance costs as one of the chief culprits behind the state’s manufacturing woes.

From The policy institute:

Workers’ compensation costs in Illinois are the highest in the Midwest, according to the state of Oregon’s 2016 study of systems across the country. It’s common for Illinois manufacturing businesses to see workers’ compensation alone eat up more than 10 percent of payroll. That can be double or triple the rate of surrounding states.

Unsurprisingly, the manufacturers that bear the brunt of that burden are bleeding.

One of reforms advocated by the group to lower workers’ compensation costs is adopting a stricter standard of “causation” in workers’ comp cases. Currently, if a workplace contributes in any way to an injury, medical and compensation costs fall to the company’s insurer. Under a stricter standard, the employee would need to prove that the workplace was the primary cause of the injury to collect full benefits.

In July, a study published by the Illinois Economic Policy Institute, a liberal think-tank, concluded that despite helping expand the state’s economy, international trade and automated technologies are among the main drivers of manufacturing job losses.

From IEPI:

Due to both trade and automation, the number of factories in Illinois has increased and manufacturing output in Illinois has increased, even though over 100,000 total manufacturing jobs have been lost. While manufacturing employment has declined by 15 percent since January 2006, the number of manufacturing establishments has increased by 6 percent and real manufacturing output has grown by 2 percent over the same time. New factories are opening in Illinois, but they are using automated technologies that require less human labor

This is the paradox of international free trade: While trends in manufacturing have caused total employment losses in Illinois, they have expanded the state’s economy. The gains from trade have become concentrated amongst the wealthy. Workers displaced from jobs that once paid a living wage have been forced to find employment in other, mostly low-paying, sectors of the economy. The overall impact has been to widen the income gap between the rich and the poor in Illinois

The authors of the IEPI study say the state can take six steps to reinvigorate the manufacturing industry: “Foster a better-educated and trained workforce, promote increased research and development, significantly improve transportation infrastructure, base energy decisions on Illinois’ natural competitive advantages, capitalize on increasing demand for clean energy, and develop a consultative capacity in ‘reshoring’ expertise.”

Other organizations like the Illinois Manufacturers’ Association, the Illinois Science & Technology Coalition, as well as Crain’s Chicago Business editorial board have called on lawmakers to reinstate and make permanent research and development (R&D) tax credits, which expired in 2015. Now, Illinois is one of the few states that does not offer such tax credits.

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More from Crain’s editorial board:

Manufacturers are heavy users of R&D, and in 2011, when Illinois’ program was still in place, 63 percent of the $57 million in tax credits went to manufacturing firms, a sector that includes everything from metal-benders to pharmaceutical makers. But other industries relied on that credit, too, including finance, insurance and retailing. Companies across every industry are investing in new and improved products to compete in the global economy. Why not encourage them to invest those dollars here in Illinois?

The average R&D job pays in the neighborhood of $93,000 a year, according to data from the Illinois Manufacturers’ Association, which would dearly like to see Illinois restore the credit to help this state win back investment and retain manufacturing jobs. Those are the kind of solid, middle-class jobs our elected leaders should be fighting to grow right here in Illinois.

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