By: John Klingner
It’s too early to tell just how much the Federal tax overhaul is going to help manufacturing across the country, but a major tax cut is sure to provide a major boost. Corporate tax rates will fall to 21 from 35 percent as part of the new tax law.
Unfortunately, Illinois’ manufacturing sector is going to need a lot more than just federal tax relief. The number of manufacturing jobs in the state has collapsed by more than 300,000 jobs since the turn of the century and there’s been little sign of recovery since the end of the Great Recession.
Illinois needs to change its business climate and its labor laws if it ever wants manufacturing jobs to come back.
Manufacturing has been in decline in Illinois and other Midwestern states for decades. The Great Recession inflicted further harm. Illinois and many of its neighboring states suffered steep declines in manufacturing between 2008 and 2010.
Illinois, in particular, has struggled mightily. The state lost 100,000 manufacturing jobs during the recession period and it has only regained 10,000 jobs since then.
In all, Illinois has just 86 percent of the manufacturing jobs it used to have in October of 2007.
In contrast, Illinois’ neighbors have begun to recover their manufacturing sectors.
Michigan and Kentucky now have the same number of manufacturing jobs or more than they had in October 2007, just before the Great Recession. Indiana and Wisconsin are not far behind.
The trajectory of each state’s manufacturing sector is even more clear when you look at manufacturing job growth over time.
All of Illinois’ neighbors have grown significantly since their collapse during the recession. Even Missouri has managed to surpass Illinois with its constant growth.
Illinois’ anti-business atmosphere likely has a great deal to do with its lackluster manufacturing recovery.
Illinois has restrictive labor rules compared to its neighbors and to many states across the country. It’s workers comp costs are the 7th-highest in the nation. And companies have to deal with one of the highest tax burdens in the country, including the nation’s highest property taxes.
Illinois lawmakers have done little to reform any of that since the Great Recession.
In comparison, Illinois’ neighbors have passed numerous pro-business reforms since 2008. Indiana, Kentucky, Michigan, Wisconsin and Missouri have gone right-to-work. Indiana enacted a major tax cut in 2013. And Iowa is considering sweeping changes to its collective bargaining rules.
Politicians in Springfield should take a page out of every neighboring state’s playbook. Illinois needs labor and workers comp reforms, at the very least, to make it more business-friendly.
If not, Illinois manufacturing will continue to stagnate and downstate Illinoisans will continue to suffer as a result.