Of Pandemics and Politics: The Outlook for Print in 2021
One problem with searching for clues to the future of anything in the events of a year as fraught with upheaval as 2020 is that many of those events simply aren’t predictive – nothing resembling them has happened before.
The fog hangs especially heavy over attempts to forecast what the printing industry will see in terms of economic, regulatory, legislative, and postal trends in 2021. This time around, past isn’t prologue: it’s mostly an index of what not to count on as the industry tries to come back as nearly as it can to the normalcy of pre-pandemic days.
COVID-19 and, to a different extent, the 2020 presidential and congressional elections were the main developments that set the industry on the new path it will follow in 2021 and beyond.
Marcia Kinter, vice president of government and regulatory affairs, PRINTING United Alliance, says she expects to see “COVID, COVID, everything COVID” keynoting efforts to update workplace safety rules in the new administration’s first 100 days.
Lisbeth A. Lyons, PRINTING United Alliance vice president of government and external affairs, calls the political contests that took place under COVID’s shadow “pretty extraordinary” for the record-setting voter turnout they drove. But she doesn’t think the results will dramatically change the pace or the focus of lawmaking in the next session of Congress.
Sigh of Relief
“The fact that the election is behind us is a positive – it removes uncertainty,” observes Andrew Paparozzi, PRINTING United Alliance chief economist. He says that apart from anything the government does or fails to do, the forces moving the national economy ahead will be driven strongly by “a tremendous, pent-up demand for everything that we haven’t been able to do for the last 18 months.”
COVID vaccines will give a “game changing” boost to the economy, according to Paparozzi, and economic stimulus programs under the Biden administration could accelerate recovery as well. He cites a Wall Street Journal survey of 60 prominent economists who agree that gross domestic product could grow by 3.7% in 2021 — an estimate he deems conservative.
Given his belief that the forces propelling the economy forward are stronger than the ones holding it back, “I’m convinced that those projections will be revised upward as the year progresses,” Paparozzi declares.
However, he also acknowledges the severity of the economic damage done to the printing industry by the downturn the pandemic triggered.
According to the November edition of the Alliance’s ongoing COVID-19 Print Business Indicators Research Report, which Paparozzi oversees, total industry sales — spanning commercial printing, graphic and sign production, apparel decoration, functional printing, and package printing and converting — were down 16.9%, on average, through the first three quarters of 2020 compared with year-earlier levels. Full-year sales should be down by about the same percentage, for a loss of $14.3 billion.
The shrinkage of revenue has had a corresponding effect on employment. Paparozzi says Bureau of Labor Statistics data indicate that the industry laid off more than 81,000 employees in March and April of 2020, only about 31,000 of whom had been rehired at the time of this writing. The sales and employment losses “are far in excess” of what the industry has experienced in previous recessions, Paparozzi notes.
Pain Across the Board
The damage has been broad as well as deep. Sales declined for the great majority (82.2%) of survey respondents, dropping by 20% or more for 53.5%, and by 30% or more for 30.7%. Sales were up for just 16.8% and were unchanged for 1%.
Paparozzi points out that even if sales were to rebound by 8% in 2021 — double the high end of the 2.5% to 4% growth range he forecasts for the year — it would restore only about 40% of what the industry to lost COVID-19 in 2020. “We’ve got long, long way to go” to get back to full economic health, he advises, adding that no company should be banking on a general recovery to solve all of its problems.
This is because recoveries, nowadays, don’t raise all boats the way they used to. “They are exclusive, not inclusive,” Paparozzi says. “You really have to prepare for them.” He points out that the 16.8% of the survey group who grew their sales during the pandemic did so by an average of 25.7%, thanks to being “aware, entrepreneurial, and agile” as they confronted the crisis.
“They didn’t wait for growth — they created growth,” Paparozzi says. Their strategies included manufacturing personal protective equipment (PPE) and moving aggressively into sectors such as health care, where the pandemic generated strong demand for products and services. They also excelled at market analysis and project execution, skills Paparozzi says will be essential for competitiveness in a post-COVID world.
Asked to say what they thought likely to attract demand from buyers in 2021, survey participants most often identified personalized, targeted, high-ROI print communications supported by data analytics. “Print that has ‘wow’ power” through sophisticated press and finishing techniques is another application to watch, according to Paparozzi. He adds that e-commerce capability is high on the shopping lists of respondents who are planning to make capital investments this year.
Capital investments are private decisions. Compliance with regulations governing workplace conditions and the environment is a public obligation. Look for significant change on these fronts as a regulation-averse administration in Washington yields to an incoming presidential team who may be much more inclined to clamp down, advises Gary Jones, PRINTING United Alliance director of environmental, health, and safety affairs.
Not likely to be continued by the Biden White House is the Trump administration’s policy of requiring federal agencies to eliminate two existing regulations for each new one they adopt. The Environmental Protection Agency (EPA) was particularly aggressive in pursuing this goal, notes Jones, with 69 deregulatory actions and another 33 pending actions to its credit.
‘Complete Polar Opposite’
The Biden White House probably will be the “complete polar opposite” of its predecessor when it comes to regulation, says Jones, adding that the incoming team will have tools to block or rescind Trump-era rules they don’t like. But this won’t happen overnight. Kinter, who shares responsibility with Jones for monitoring federal and state regulatory activity on behalf of Alliance members, points out that the federal system “is a very large beast, and it takes a lot to move it.”
Nevertheless, both are bracing for what Jones says could be a “dramatic turnaround” of policy at the Occupational Safety and Health Administration (OSHA), the U.S. Department of Labor organization whose workplace safety rules impact every print and graphics business.
Kinter foresees a “battle” between congressional progressives and centrists over appointing an assistant secretary of labor to head the agency (a post left open by the Trump administration). One reported contender for the top job at OSHA is a deputy assistant secretary of the agency during the Obama administration, and is “no friend of business,” according to Jones.
He says that while OSHA was “generally more favorable” to the private sector under Trump than it had been previously, the tone of the relationship will not be the same under Biden. The change in direction could bring more “naming and shaming” enforcement of safety regulations, as well as more action by inspectors on lockout/tag-out, a machine inspection protocol that isn’t practical for late-model, digitally controlled print and graphics equipment.
Jones and Kinter also think OSHA could release an emergency technical standard for COVID-19 prevention in workplaces, which would require employers to file written plans for implementing the safeguards required by the standard.
As for environmental regulation, “the stage has been set for quite a bit of activity at the state level,” Kinter says. With federal EPA standards as their baselines, many states can be expected to tighten rules about industrial solvents, shop towels, hazardous waste, and ozone emissions — all representing compliance burdens for the printing industry.
EPR: ‘Print and Packaging Tax’
What Jones and Kinter see as the biggest potential regulatory red flag for the industry is the states’ rising interest in extended producer responsibility (EPR): an environmental doctrine that says manufacturers of products that end up as waste should bear the cost of managing them at the end-of-life stage.
According to the Product Stewardship Institute, there were about 115 EPR policies in effect across 33 states in 2019, covering a range of products such as mattresses, carpeting, paint, and fluorescent lighting.
EPR hasn’t touched the printing industry so far, but the fear is that the policy could be broadened to include “anything printed that goes into the waste stream,” Kinter says. States taking this step would effectively impose a “print and packaging tax” along the lines of the per-ton-of-paper recycling fees collected by the Canadian province of British Columbia, which has had EPR programs in place since 1994.
Kinter says that if American states haven’t been moving forward lately with EPR plans for print, it’s probably only because their legislatures have been shut down by COVID-19. Imposition of EPR fees would particularly hurt “the burgeoning industry of digital packaging,” she adds.
Monitoring and responding to state-level EPR initiatives will be a priority for the Alliance’s regulatory affairs team this year. Jones points out that states trying to close gaps that the pandemic opened up in their budgets will be looking keenly at EPR fees as a revenue source. Print and graphics firms obliged to pay these fees, he warns, will have to pass the expense through to customers, who can find alternatives to ink on paper if the cost of print is more than they want to pay.
Three Ts of Priority
Lyons thinks the Biden administration’s first 100 days will feature some “made-for-TV policy announcements” such as reentry into the Paris Agreement for controlling greenhouse gas emissions. Then taxation, trade, and transportation will emerge as the administration’s top three legislative priorities, with climate change as an additional focus of special attention.
Efforts to change tax laws will be “close down the middle of the lane,” rather than radical, as lawmakers “nibble” at the tax structures they want to change. There could be, for example, attempts to return estate tax rates to their pre-Trump levels – an issue of concern, Lyons points out, for the 60% of printing businesses that are family-owned. The industry should also be vigilant about preserving 100% deductibility of advertising expenses for print and direct mail, she advises.
Bipartisan action on transportation and infrastructure could include changes to reduce the cost of shipping raw materials; there also could be electric vehicles and similar types of assistance for the USPS. Lyons says that while the Biden administration will take a protective “Buy American” stance on securing supplies of things like PPE, its trade policy probably will rely less on the Section 232 tariffs that the Trump administration invoked to slap duties on aluminum, newsprint, and coated freesheet.
President Biden, Vice President Harris, and their counselors will not be shy about pushing for programs to counter climate change, which Lyons identifies as “a very passionate issue” for them. She says that although grand schemes like the Green New Deal will be “dead on arrival” in a sharply divided Congress, the White House won’t always have to wait on the passage of bills to get what it wants.
SEC as Climate Champion
Expect to see major executive order announcements and regulatory action to circumvent congressional gridlock on climate change within days or weeks of the inauguration, Lyons says. And government agencies can take their own actions on climate change that accord with the White House’s strategy. For example, the Securities and Exchange Commission can — and under a Biden administration likely will — require publicly traded companies to disclose their climate risks and greenhouse gas emissions.
Helping its members digest the sausage made in Congress and the state legislatures is a primary mission of the Alliance, which combines and coordinates decades of expertise in legislative, political, and regulatory affairs to advocate for the printing industry as a whole (see sidebar on page 32).
Lyons says that the recently conducted Legislative and Regulatory Priorities Survey of the PRINTING United Alliance membership will enable the association to better target its advocacy efforts. A forthcoming report will publish the results, along with an overview of the governmental landscape for print and graphics businesses.
It’s important for owners of these businesses to help politicians understand the impact of their actions on local economies and industries, according to Lyons. She notes that many elected officials, especially newcomers to Congress and state legislatures, have only a “cursory, elementary” knowledge of printing. Thus, they’ll need a lot of education from their constituents who do it for a living.