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KSM Blog | Katz, Sapper & Miller CPA

Healthcare Costs Hurt U.S. Manufacturers Globally

Posted 8:54 PM by

U.S. manufacturers face a steep hill to be competitive globally according to a recent report by The Manufacturers Alliances/MAPI and the Manufacturing Institute. The report, titled "The 2011 Structural Costs of Manufacturing in the United States," states that U.S. manufacturers are paying approx. 20% more in costs than nine of its largest competitors in the world (Canada, China, France, Germany, Japan, Korea, Mexico, Taiwan, and the United Kingdom). The impact on manufacturing profitability can be quite large.

The study looked at five key elements, which included corporate taxes, employee benefits costs (including health care costs), tort (legal costs for lawsuits) costs, pollution abatement compliance costs, and energy costs.

“The story of the structural cost gap boils down to two issues: health care and corporate taxes,” says Jeremy Leonard, author of the study and an economic consultant with MAPI via the MAPI website. “We have the policy tools to deal with them, but lack the leadership to bring them under control. Absent structural costs, U.S. manufacturers are broadly competitive with their international peers thanks to the tireless efforts to innovate and become more efficient. It is up to the policymakers to step up to the plate to ensure a vibrant manufacturing sector in the years ahead.”

The largest barriers noted in the study relate to corporate taxes and employee benefits, mainly health care costs. The U.S. pays approximately 8.6% more for corporate taxes and 5.7% more for employee benefits on average then their competitors abroad. This can have a dramatic impact on the pricing model of U.S. manufacturers, which will ultimately impact manufacturing profits in the U.S.

Stephen Gold, president and CEO of MAPI stated, “This report tells an important story, one in which the White House and Congress should be very interested. While we recognize American manufacturers face a myriad of challenges from overseas, these data demonstrate that domestically imposed costs further undermine our ability to compete. We hear a great deal from policymakers these days about the need to bring manufacturing back to America, yet these challenges continue to undercut American manufacturing competitiveness.”

About the Author
Justin Hayes is a director in Katz, Sapper & Miller’s Audit and Assurance Services Group. Justin works with clients to help ensure accurate financial reporting, keeping an eye on their bottom line, helping them avoid risk and maximize efficiencies. Connect with him on LinkedIn.

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