View Complete 2011 Structural Cost Report 
Chapter 1 - Raw Cost Index
Chapter 2 - Corporate Tax Rates
Chapter 3 - Employee Benefits
Chapter 4 - Tort Costs
Chapter 5 - Energy Costs
Chapter 6 - Pollution Abatement Costs

In the summer of 2008, on the heels of the greatest financial crisis since the Great Depression, the U.S. economy stumbled badly, eventually contracting more than 5 percent from its peak.  Manufacturing, for almost a century the engine that has driven the American economy, fared much worse – contracting more than 20 percent from peak to trough.  Such a collapse made recovery all the more difficult for the economy at large, because manufacturing – while less than 12 percent of GDP – remains one of the most influential economic sectors.  No sector stimulates more direct and indirect economic activity; no sector invests more in research, development, and innovation; no sector comes close to providing manufacturing’s level of exports; no sector can match the average total compensation provided to its workers.

The good news for policymakers was that, in the initial recovery phase, U.S. manufacturing experienced a dramatic rebound in business, spawned by a huge inventory swing and a boost in exports, providing enough steam to keep a struggling U.S. recovery from backsliding. 

The bad news was that, even with the sharp rebound, by the close of 2011 the factory sector had only clawed halfway back to its December 2007 peak.  Unfortunately, full recovery is made all the harder by a fundamental challenge:  U.S. manufacturers face a set of structural disadvantages that erode U.S. competitiveness and offset many of the productivity gains achieved through innovation and the relentless pursuit of efficiencies.

What follows on these web pages is an analysis of the cost of production in the United States.  The initial groundbreaking report documenting the underlying structural costs of U.S. manufacturers was released in 2003.  Subsequent reports were issued in 2006 and 2008.  This new, web-based Structural Cost Report will allow The Manufacturing Institute and MAPI to provide a real-time analysis, with updates throughout the year.

What we find in the middle of 2011 is that structural costs are slowly eating away at the ability of U.S. manufacturers to compete effectively.  While manufacturers have many challenges in the current global environment, domestically imposed costs are undermining our ability to compete by adding at least 20 percent to the cost of doing business in the United States.

We arrived at this figure by beginning with a raw cost index benchmark based on wage compensation relative to total value added in manufacturing, comparing the United States and nine major trading partners including Canada, China, and Mexico.  Then, we compared the policy decisions that affect the cost of business in each country including: corporate tax rates, employee benefits, tort litigation, regulatory compliance and energy. 

The analysis demonstrates how even nominally more expensive locations such as Canada or the United Kingdom are, in fact, lower-cost locations for production when these expensive cost factors are weighed.

In an era when policymakers have acknowledged the need to build a more competitive environment for manufacturers here, these underlying cost pressures are highly counterproductive.  If ever there were a wake-up call for U.S. policymakers about the costs they continue to impose on U.S. manufacturers, this is it.

There is a wide range of policy steps that federal and state governments can immediately take to support stronger U.S. manufacturing; see the NAM’s manufacturing strategy at  We encourage elected officials to begin shaping a pro-manufacturing agenda for the near future. 

The loss of a strong manufacturing base would have unfortunate consequences for the U.S. standard of living as well as our national security.  We urge all Americans who are concerned about the future of our country to understand the cost burden that U.S. companies face and help foster a new appreciation for manufacturing among policymakers, the media, and the American public.

We commend the author, Jeremy Leonard, economic consultant to MAPI, for his creativity in distilling huge amounts of sometimes disparate data to complete this project.


Emily Stover DeRocco
The Manufacturing Institute                                                 

Stephen Gold
President and CEO
Manufacturers Alliance for Productivity and Innovation

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