 Illinois manufacturing communities continue to suffer
under both difficult global conditions and state government’s anti-growth
policies. On top of weak global demand for products such as Caterpillar
machinery, Illinois’ burdensome taxes and regulations make the state
unattractive for new investments that would create more manufacturing jobs. In
contrast, industrial communities in other Rust Belt states are experiencing a
revival.Michigan, in particular, is making a manufacturing comeback, aided by
increased demand for automobiles and pro-growth state policies. Michigan crossed
another recent milestone, with the state surpassing 600,000 manufacturing jobs
in July.
Michigan began recovering after hitting a Great Recession bottom in June 2009.
Auto companies received short-term help from the federal government and made
their cost structures more competitive. The state began to institute pro-growth
policies such as Right to Work and cutting taxes. When global demand for
automobiles revived, Michigan manufacturers were ready to meet it. Since its
recession bottom, the state has added 170,000 manufacturing jobs out of a total
of 560,000 private-sector jobs.
 Michigan surpassed Illinois for total manufacturing jobs in April 2015, even
though Illinois’ economy is much larger and Illinois typically had more factory
jobs in the past. Since passing Illinois, Michigan has added another 21,300
manufacturing jobs, while Illinois has lost 8,000.
Michigan’s bounce back from the recession was stronger than Illinois’, and the
Wolverine State has sustained manufacturing jobs growth even as Illinois has
slowed down. Illinois had a weak bounce back from the recession, and has lost
manufacturing jobs in three of the last four years.
While Michigan manufacturing is dominated by the auto sector, Illinois’ flagship
manufacturing company is Caterpillar, the construction and mining equipment
maker. CAT has faced difficult global conditions due to low commodity prices and
the resulting weak demand for products used in the extraction of commodities.
However, global conditions aren’t entirely to blame for Caterpillar’s struggles
for two reasons:
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 Manufacturing companies in a variety of sectors have been
relocating from Illinois to Indiana and other states, often
expressly for policy reasons.
Caterpillar CEO Doug Oberhelman is on record stating that even in
good times, CAT doesn’t look to make new investment in Illinois due
to state tax and regulatory issues.
Illinois needs a better business environment for manufacturers.
When market conditions improved for auto manufacturers, Michigan had
its taxes and regulations in order to help capture tens of thousands
of new manufacturing jobs. Illinois can’t say the same. Whether
market conditions are strong or weak for Illinois manufacturers, the
state policy environment is always uncompetitive.
Illinois needs to put its house in order to revive its industrial
economy. Policy solutions to prepare Illinois for a stronger future
include:
- Workers’ compensation reform to put Illinois’ costs in line
with other states
- Spending reforms to control the overall tax burden
manufacturers face
- A property-tax freeze to protect industrial properties from
confiscatory tax rates
- Sales-tax reform to eliminate sales-tax “pyramiding” by
removing the sales tax on manufacturing and other business
inputs
- Labor reforms to guarantee worker choice through
Right-to-Work laws, which attract new manufacturing investments.
Illinois’ beleaguered manufacturing communities deserve better
from their state government. Not only do state policies thwart
private-sector jobs growth in cities like Peoria, Decatur and
Rockford, it also makes it more difficult for these cities to deal
with overwhelming pension debts. However, if state government fixes
its tax and regulatory environment, these communities can thrive
again.
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