Following its work during the 2021 legislative session that concluded earlier this year, state lawmakers on the Senate Labor, Commerce & Tribal Affairs Committee are now looking at the state of the manufacturing sector in Washington. While the sector has diminished in both workers and its share of the state’s overall workforce since 2000, a new report by the Association of Washington Business (AWB) emphasizes the continued importance of manufacturers to the state economy even as the sector overlaps with other industries.
“Our state wins when manufacturing is growing, which means we’re creating good jobs, high paying jobs in our state,” Rankin Equipment President Dave Rankin told the committee at its July 12 meeting. “Growing the manufacturing base in our state should be a bipartisan goal for policymakers.”
In 2019 manufacturing employed 305,300 workers in the state—or nine percent of total nonfarm employment, generating $192 billion in revenue and composing 20 percent of state gross business income for all industries. Although a drop from 2000, the current workforce size is an increase from the 286,300 workers employed in 2016.
These are also high-paying jobs, with the average annual wage in 2019 at $81,200 – 17 percent higher than the statewide average. Yet, due to a skilled labor shortage, employers have struggled to fill those positions.
Although Puget Sound has earned the moniker “Silicon Valley of Space” for its large concentration of aerospace and space companies, the AWB report noted that manufacturing provides jobs in most of the state, with 23 of the 39 counties containing at least 1,000 industry jobs. Notably, there are a total of 88,000 aerospace and space workers who account for 30 percent of all manufacturing jobs in the state.
AWB has sought to generate greater awareness of the sector’s presence in the state through an annual tour of different manufacturers in Washington.
The report also found that manufacturing is increasingly overlapping with Information & Communication Technology (ICT), which consists of software publishers, ecommerce, and cloud computing. An estimated 15 percent of space industry employees do ICT work, as do nine percent of workers in the biotech, and six percent in energy systems.
“The distinction between tech and manufacturing as separate sectors is becoming less defined,” the report states. “Various manufacturing firms develop their own software solutions, whilst the ICT sector also designs and builds hardware products.”
AWB Government Affairs Director for Manufacturing Tommy Gantz told Senate committee members at the July 12 meeting that ICT is “important to our state economically, and a lot of manufacturing is wrapped up on that ICT technology. They’ve become somewhat codependent on one another.”
However, the report also stressed the importance of a healthy regulatory system in maintaining and growing manufacturing. A 2015 State Auditor report found that “state agencies are currently coordinating some of their work, but agency staff describe much of that coordination as informal and initiated only on an “as needed” basis. The state lacks a lead agency or long-term strategy to identify and prioritize opportunities for targeted, multi-agency coordination of regulatory processes, and to facilitate that coordination on an ongoing basis.”
The state’s business tax burden is another area the report says needs improvement compared to other parts of the country. Washington is one of two states to have a business and occupation (B&O) tax imposed on gross revenue. That tax disproportionately affects high-revenue employers with low profit margins. It also creates a “pyramiding” effect in which a product or item is taxed multiple times as it passes from one employer to another.
Efforts to relieve the tax burden on manufacturers have proven unsuccessful, starting with 2017-19 operating budget. A provision lowered the manufacturing B&O rate, but it was vetoed by Governor Jay Inslee on the claim that it was added without proper transparency.
With increased steel prices and restrictive trade policies implemented recently, Rankin told the committee that “most businesses have seen challenges over the years as their overheads have increased. We need to look at policies that will help us to be competitive. We face many challenges in the industrial world, and policies issues are becoming more and more critical to success.”
While the report cited low energy costs as a key advantage for manufacturers in Washington state, Sen. Curtis King (R-14) warned that could change as utilities implement the 2019 Clean Energy Transformation Act (CETA) requiring them to rely more on wind and solar power.
However, High Peak Strategy Principal Spencer Cohen told King that so far the state’s energy prices have remained stable; what’s changed is that other states have brought their energy costs down to Washington’s rates.
However, on a cautionary note, Cohen added “that could change based on some of the possibilities (with CETA).”