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Policy and Legal

Labor Department Announces Contractor Rule

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The U.S. Department of Labor announced a rule that would classify gig workers as contractors rather than employees, according to The New York Times (subscription).

The rule: The new rule identifies two main factors as determinants of whether a person should be classified as a contractor or an employee.

  • The first is how much a company controls the way a worker performs his or her job.
  • The second is how much a worker can profit based on initiative, as opposed to earning a steady salary regardless of performance.

The upshot: The rule could likely shift the employment status of millions of Americans, including many in manufacturing. If they use contractors, companies do not have to pay the minimum wage, overtime, a portion of social security taxes, or unemployment insurance and workers’ compensation insurance.

A word from the NAM: “When finalized, the rule could solidify the use of independent contractors, including in manufacturing. Independent contractor arrangements benefit companies and workers by increasing flexibility and streamlining the human resources processes,” explains NAM Director of Labor and Employment Policy Drew Schneider. He adds:

  • “Manufacturers are currently operating under a confusing patchwork of state and federal laws that have defined independent contractors in numerous ways, causing legal uncertainty and unnecessary compliance costs.”
  • “Manufacturers and their business partners will benefit from a clear and updated independent contractor standard that protects this important business practice and allows NAM members to focus on producing America’s essential goods and services.”
Policy and Legal

The SEC Brings Sense to the Proxy Process

The Securities and Exchange Commission changed an important standard for publicly traded companies today—the amount of stock that a shareholder must have to put proposals on the proxy ballot (which the full shareholder base votes on every year).

It might sound like a small thing, but this “threshold” is a big deal. NAM Director of Tax and Domestic Economic Policy Charles Crain broke it down in a recent interview.

The previous standard: Previously, any shareholder holding $2,000 in stock for one year could put a question on the ballot, Crain explains. Since that’s a relatively low number, activists would go to dozens of companies and buy $2,000 of stock at each—not because they were interested in the companies’ performance, but because they wanted a platform on which to debate political issues.

Here’s a data point that illustrates the extent of the problem: In 2019, just three people sponsored 38% of all shareholder proposals at Fortune 250 companies, Crain says.

The resubmission problem: Once something was on the proxy ballot, it was also easy to resubmit it the following year, adds Crain. A ballot question only needed 3% support among shareholders to stay on the ballot for a second year. If it was voted down a second time, it had to get 6% to move forward the next year and just 10% after that. “Ninety percent of shareholders could reject a measure forever, and it could still get resubmitted every year,” Crain says.

What’s changed? The SEC’s new rule creates tiered thresholds, which will give more power to long-term shareholders.

  • To submit a proposal after holding stock for just one year, an investor now needs to hold $25,000 in stock.
  • If an investor holds stock for two years, the threshold drops to $15,000.
  • If an investor holds stock for three years, it drops to $2,000.

The rule also changes resubmission thresholds to 5% after one vote, 15% after two votes and 25% after three votes to keep a failing question on the ballot in consecutive years. Some measures take time to gain support, and the rule allows for that while taking a more commonsense approach, Crain says.

Why it matters: Holding repeated proxy votes can be time- and resource-intensive for companies, says Crain, and politically motivated proposals distract businesses and investors from the real issues that drive long-term value creation for shareholders.

The NAM’s actions: Crain says, “The NAM has called for proxy reforms for years, and we’ve engaged with both Congress and the SEC to highlight the need to modify the proxy ballot thresholds. Last November, NAM President and CEO Jay Timmons praised the SEC for proposing a rule to combat activists that ‘pressure manufacturers to focus on political issues at the expense of company growth,’ and our comments on the proposal helped lead to today’s final rule. We’ve pushed for this outcome for years—and we’re glad the SEC has come down on the right side.”

News

“The Opportunities May Surprise You”

A STEP Ahead honoree interview

As a kid, Amanda Wade Hodges designed intricate items with her dad for her school’s Machine Day and created complicated Halloween costumes. Today, she credits those early childhood experiences with setting her on the path toward a creative manufacturing career.

Hodges is a process engineer at BASF Corporation’s site in Chattanooga, Tennessee, and has been selected as one of The Manufacturing Institute’s 2020 STEP Ahead Emerging Leaders. Emerging Leaders represent the future of the industry and have demonstrated exceptional accomplishments at the beginning of their careers.

What she’s doing: At BASF, Hodges uses a Lean Six Sigma program to cut waste and deploy funding effectively, while also serving as a leader in the company’s environmental impact, health and safety initiatives. These skills enabled her to support the company’s COVID-19 response efforts.

  • Since March, Hodges has helped BASF make changes to its operations and facilities, which included the implementation of precautionary measures like health screenings and mandatory mask wearing. To reduce the risk of exposure, BASF employees are asked to practice the same safety precautions at home and in the community as they do at BASF facilities.
  • In early July, BASF launched its internal “Pledge to Protect” campaign to encourage employees to share why they wear face coverings, practice social distancing and clean and disinfect. “Our priority remains the health and safety of our employees, contractors and communities,” says Hodges.

A manufacturing advocate: Hodges is committed to helping kids get the same early exposure to STEM and manufacturing that she did.

  • She participates in local STEM Days in the Chattanooga community, where she encourages kids to pursue careers in industries like manufacturing.
  • She also works with BASF’s Kids’ Lab at a local elementary school during National Chemistry Week.
  • And last, she volunteers at her alma mater, the University of Tennessee at Chattanooga, in order to connect with young people who are interested in the field. “Every day comes with new challenges and opens doors to be innovative,” she says.

A word of advice: “My advice to young women considering manufacturing is to just give it a try,” says Hodges. “Jobs in manufacturing are very diverse in the requirements and skills needed. Manufacturing utilizes a variety of skillsets, from conceiving an idea to completing the product to shipping it to the customer. I would encourage women to investigate the different opportunities, because they may surprise you.”

The 2020 STEP Ahead Awards will be held virtually on Thursday, Sept. 24, 2020, 6:00–7:00 p.m. EDT. To register to watch, please click here.

Policy and Legal

Rural America Needs Better Broadband

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With so many people working from home, access to high-speed internet has become more important than ever, according to The Wall Street Journal (subscription). Still, some people—and particularly those living in rural areas—continue to struggle to connect.

Some higher speeds: On average, internet speeds have gotten faster. According to data from WhistleOut, which compares broadband and wireless internet plans, home internet speeds across the United States have increased from an average of 84.9 megabits per second in March to 94.6 megabits per second in July. The minimum broadband service speed, according to the FCC, is 25 megabits per second.

A few rough patches: Still, plenty of people are being left out. A study from Microsoft suggests that up to 150 million people across the country have slow or unreliable internet connections.

Why it matters: Broadband doesn’t just make it possible to work from home; it’s also important for COVID-19 response measures like contact tracing.

The NAM’s angle: In April, the National Association of Manufacturers released the “American Renewal Action Plan,” which calls for historic investment in our nation’s infrastructure, including digital infrastructure, to spur economic renewal and competitiveness. The NAM’s “Building to Win” strategy also includes a focus on broadband buildout along with other forms of infrastructure critical for manufacturing.

The word from NAM: “Connectivity was already a key issue for manufacturers before this crisis as they embraced digital transformation,” said NAM Director of Innovation Policy Stephanie Hall. “The importance of universal broadband for our industry and communities is even clearer now as we turn to technology solutions for work, school and nearly every aspect of daily life.”

Workforce

Growing Up on the Factory Floor: An Interview with a STEP Honoree

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Kayleigh Hogan remembers building piggy banks out of pump parts during “Bring Your Child to Work Day.” Those visits to manufacturing facilities proved to be formative: the daughter of not one, but two STEM professionals in manufacturing, Hogan is now a mechanical asset engineer at Covestro LLC and one of the honorees of the Manufacturing Institute’s 2020 STEP Awards.

“I remember seeing pumps being machined and painted on massive assembly lines,” says Hogan. “At the time, I didn’t realize that this wasn’t quite the stereotypical workplace setting, but I liked that my parents’ work had such tangible results.”

What she does: Today, Hogan manages a $14-million maintenance budget and leads vital capital projects for Covestro’s environmental control, utilities and infrastructure unit. Covestro’s core product lines include raw materials for health-care products such as specialty films for face shields and thermoplastic polyurethane for face masks, which means the company was well placed to respond to COVID-19. Covestro also produces personal protective equipment such as “ear savers” for masks and materials used in drug delivery devices, ventilators and oxygen concentrators.

The award: Hogan is one of the 130 recipients of the 2020 STEP Ahead Awards. These awards honor women who excel in manufacturing careers and act as role models to current and future women workers in the industry. For Hogan, the STEP Ahead Award confirmed that she’s making a difference in her workplace and community. She is honored to be in the company of so many other extraordinary women leading the manufacturing industry.

“It is a truly a humbling experience to see the company I’m in as a STEP honoree,” says Hogan. “The STEP Ahead alumnae community of phenomenal women is amazing, and I’m so excited to meet them in person someday. Receiving this honor also makes me realize how many other remarkable women I know that work in manufacturing who deserve recognition for all that they do.”

Words of advice for other women: “Come join us!” says Hogan. “New ideas are always needed, and fresh new faces are some of the best catalysts for change. Without diverse people and new ideas around the table, there is little hope to meet the ever-changing demands of manufacturing. Never underestimate what your ideas can bring about; your idea may just be the one thing the conversation needed to really get off the ground.”

The 2020 STEP Ahead Awards will be held virtually on Thursday, Sept. 24, 2020, 6:00–7:00 p.m. EDT. To register to watch, please click here.

Policy and Legal

How Trade Route Shifts Are Affecting Ports

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West Coast ports are being impacted by changing trade patterns, losing imports to the East Coast and Canada, among other competitors, according to The Wall Street Journal (subscription). Some of that shift began in 2017, after infrastructure work made it possible for larger vessels to use the Port of New York and New Jersey. Meanwhile, West Coast ports aiming to move goods east must use networks of trains and trucks that run on crumbling U.S. infrastructure.

The breakdown: Ports on the West Coast took in less than 40% of seaborne imports during the first seven months of the year, with ports on the East Coast racking up a little bit more than half.

  • Asian imports are still leaning to the West Coast, but the makeup is beginning to change. Last year, Los Angeles moved 9.4 million containers compared to 7.5 million containers for New York and New Jersey. Still, the New York/New Jersey East Coast port did become the second-busiest port in the country, bumping Long Beach, California, out of the runner-up spot.
  • Canadian ports are also getting into the game, offering cheaper transportation services that undercut U.S. costs.

Related: West Coast freight networks—including railroads and trucks—are struggling to handle demand after limiting personnel and operations in the face of COVID-19, according to The Wall Street Journal (subscription).

The NAM’s angle: The NAM has urged Congress for years to enact infrastructure reform, laying out its priorities in its “Building to Win” blueprint.

Most recently, during United for Infrastructure (formerly Infrastructure Week), Sen. Rob Portman (R-OH) spoke to NAM members at an event co-hosted by Nucor Steel about Congress’s response to the COVID-19 pandemic and the importance of infrastructure investment. During the event the senator noted, “The most sustainable path forward on surface transportation authorization is a one-year extension of the Fixing America’s Surface Transportation (FAST) Act.”

Business Operations

How a Manufacturer Brought 3D Printing into the Foundry

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When you think of 3D-printing, you probably don’t think of metal casting. But in fact, 3D-printing has been a huge help to foundries—thanks in large part to one Ohio-based company, Humtown Products. In 2014, the family-owned business decided to try using 3D printers to create castings for engine blocks in cars, trucks, construction equipment and aerospace technology. Since then, Humtown has led an industry-wide transformation of metal casting and will be recognized at the 2020 Manufacturing Leadership Awards in October for commercializing 3D printing in the sector.

How it works: Ordinarily, metal casting involves creating a tool or pattern from materials like plastic or wood, then packing sand tightly around the pattern to form a mold. Then workers pour metal into the mold, creating the finished component. But with 3D printing technology, Humtown can skip the tooling stage entirely, printing the sand mold through software commands instead.

How they did it:  Back in 2014, there were only a few sand-casting 3D printers in north America. They were mostly used for prototyping and cost two million dollars each. Because the technology hadn’t been widely used, Humtown struggled to find a bank that would finance a loan. The company ended up working with America Makes—a program launched by President Obama—and partnering with local schools like Youngstown State University and the University of Northern Iowa, which was primarily using the technology for prototyping at the time.

Brandon Lamoncha, who is now Director of Additive Manufacturing at Humtown Products, spent three years traveling to and from Iowa to study the technology, while also traveling to foundries around the country to spread the word about 3D-printing. He made the case that a new wave of technology was coming—and that, if American foundries didn’t embrace it, they would be left behind the curve and possibly out of business.

“When we got into this game,” Lamoncha says, “you could count on one hand the number of 3D sand printers in North America. Now there’s 40 or 50.”

The benefits: The technology has been effective for a number of reasons.

  • It’s faster: Using traditional methods, it might take 18-20 weeks to develop the tooling to make a cylinder head for a customer’s car. Now, Humtown can receive the data they need on a Friday, run their printers over the weekend and start pouring metals on Tuesday or Wednesday.
  • It’s more efficient: A lot of machining involves subtractive technology; for example, you might take a hunk of aluminum, carve out what you need and discard what you don’t. With 3-D printing technology, Humtown is using additive manufacturing instead: they’re starting with nothing, and building only the things they need.
  • It’s powerful: The technology allows the metal casting industry to make parts that were once too complicated to make using conventional processes. For example, complex volutes for pumps were made in sections in the past—but 3D printing allows the parts to be made all together.
  • It’s creative: 3D printing allows Humtown to produce novel designs that weren’t possible to make with tooling. Now, the company can take full advantage of the creativity of their engineers.

The result: Six years ago, 3D printing was used in less than 2 percent of sales at Humtown. Today that number has risen to 40 or 50 percent.

The last word: “In hundreds of years, nothing has been this big of a paradigm shift,” said Lamoncha. “Humtown has been around since 1959. Casting has been around since the Egyptians, and not a lot has changed in the metal casting industry. This kind of change? This is amazing.”

Business Operations

NAM Health Care Helps Small Manufacturers

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When Litko Aerosystems’ health-care provider increased its rates by double digits — again — CEO Ken Litko knew he needed another option. That’s when he signed his business up with NAM Health Care, an association health plan created by the NAM, Mercer and UnitedHealthcare®. The plan allows manufacturers with fewer than 100 employees to band together in order to purchase affordable coverage that is usually available only to larger manufacturing companies.

The good stuff: NAM Health Care gives small and medium-sized businesses a bunch of great reasons to join, including:

  • Comprehensive benefits: NAM Health Care offers a range of benefits, including health insurance, vision coverage, dental benefits and life insurance policies.
  • Lower costs: NAM Health Care plans may help manufacturers save on their annual health insurance costs and help employees save on premiums.
  • Access to health tools: NAM Health Care provides access to UnitedHealthcare’s largest preferred-provider organization networks. It also offers access to Mercer’s Multiple Employer Solutions suite, which is a one-stop shop designed to make the benefits buying process easy for NAM members and their employees.
  • A tailored experience: NAM Health Care is designed specifically for small to medium-sized manufacturers. Instead of forcing employers and workers to hunt around for the kind of coverage that works for them, NAM Health Care prioritizes manufacturers’ needs and interests.

How it works: NAM Health Care is operated by the plan’s Governing Committee, which is made up of mostly small and medium-sized manufacturers. The committee manages the NAM’s medical, dental, vision and life plans with the support of Mercer and UnitedHealthcare.

Why it matters: At a time when manufacturers are seeking millions more skilled workers, a strong health benefits program may help attract and retain talented people. According to a study by marketing agency Fractl, which was featured in the Harvard Business Review, 88% of respondents would give health coverage “some consideration” or “heavy consideration” when job hunting (the highest ranking in the study). With NAM Health Care, manufacturers can offer excellent benefits to current and prospective employees.

The last word: According to Litko, “We were looking for a reduction in overall cost, and we were looking for a reduction in employee costs. . . . Looking at what we have currently, I’m definitely glad we changed when we changed.”

Check out the plans here.

Business Operations

Manufacturers Take Advantage of Federal Liquidity Programs

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The NAM released the results of its most recent Manufacturers’ Outlook Survey today. Manufacturers reported a boost in optimism—up from 33.9% in Q2, which was the lowest reading since the first quarter of 2009. The survey also found that a significant number of manufacturers used the federal liquidity programs that the NAM advanced early in this pandemic. The data shows:

  • 72 percent of manufacturers that faced negative cash flow impacts due to COVID-19 used the Paycheck Protection Program, Main Street Lending Program or other liquidity program.
  • Nearly 92 percent of manufacturers that used federal liquidity programs said those funds were helpful in keeping their business afloat, retaining workforce or meeting other necessary expenses.
  • 66 percent of manufacturers are positive about their company’s outlook, a great improvement from the Q2 results. Still, the outlook remains below the historical average of 74.4%, and 62% of manufacturers expect their firm’s revenues will not get back to pre-COVID-19 levels until 2021 or later.

Additional context from NAM President and CEO Jay Timmons: “Congress and the administration have acted on more than five dozen of the policy provisions that the NAM made in our ‘American Renewal Action Plan’ and other recommendations. Without the bipartisan relief legislation signed into law earlier this year, this rise in optimism would not have been possible. But for our industry to truly recover and to keep our economy growing, further bipartisan congressional action is needed.”

You can find the full survey here.

Business Operations

Manufacturing Sees an Increase in Job Openings

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The Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (JOLTS) for July, which shows the persistent gap between open manufacturing positions and available skilled workers—even amid a pandemic. According to the survey, the manufacturing industry saw 408,000 manufacturing job openings in July—an increase of more than 60,000 jobs since the prior month and the best result since February, before widespread COVID-19 restrictions came into effect.

A few more numbers:

  • Nonfarm business job openings rose from 6,001,000 in June to 6,618,000 in July, which was also the strongest pace since February (7,004,000).
  • Net hiring remained weak, with manufacturers taking on 321,000 workers in July, down sharply from 432,000 in June.
  • Nonfarm business layoffs decreased from 1,995,000 in June to 1,721,000 in July, which represents the slowest pace since March 2019 (1,698,000). Meanwhile, layoffs in the manufacturing sector declined from 184,000 to 157,000.

What the numbers mean: According to NAM Chief Economist Chad Moutray, “This suggests that firms are once again increasing their interest in adding new workers, even as the sector attempts to rebound from the COVID-19 pandemic and the overall labor market has changed dramatically.”

Related: Applications for state unemployment benefits failed to decline as expected in July, Bloomberg reports.

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