PCRD

Manufacturing R&D Intensity in the Midwest

Federal Reserve Bank of Chicago economist Bill Testa wrote recently about manufacturing's role in the Midwest economy (see here). One interesting observation is on the concentration of research and development activity in the region. He notes that the high degree of ongoing R&D intensity is a likely indicator that manufacturing will continue to play a significant role in our economy. 

New Federal Research Priorities in Manufacturing

A new federal report outlines the top priorities for federal research in manufacturing: hydrogen energy technologies, nanomanufacturing, and intelligent and integrated manufacturing. Each of these areas has a potential for job growth and serving broader national interests. In addition, the report points out that these three areas of research are interdependent.

The report, released by the National Science and Technology Council, is designed to highlight areas of manufacturing research that are likely to generate high returns for the national economy. The report, starting on page 73, outlines some of the workforce issues facing the future of manufacturing. The authors start by outlining the main conclusions of the 2005 Manufacturing Skills Gap report of the National Association of Manufacturers:

In its 2005 skills gap survey of more than 800 manufacturing businesses, the National Association of Manufacturers (NAM) found that 81% were experiencing “severe” (13%) or “moderate” (68%) shortages of skilled workers overall, and 90% reported shortages of skilled production employees.

The report goes on to outline the skills needed by tomorrow's manufacturing workers:

To operate a modern production facility, manufacturers require workers with adequate preparation in fundamentals such as mathematics, science, reading comprehension, and writing; strong workplace competencies, including computer literacy, teamwork, and critical thinking; and technical competencies in areas such as quality and process control, supply chain management, and integrated production systems. Manufacturing workers may also need to develop specialized skills tailored to specific jobs, industrial needs, and technology requirements...

Manufacturing skills certification is one of several steps toward ensuring an adequate supply of “knowledge technologists,” a term coined by management and quality pioneer Peter Drucker. In future manufacturing operations, as well as in other sectors of the economy, Drucker predicted, workers will continue to engage in manual tasks, but their jobs will require a “substantial amount of theoretical knowledge which can only be acquired through a formal education, not through an apprenticeship.”

You can read more about the report here or you can download a copy of the report here.

Prospects for Auto Employment

Indiana's economy continues to be buffetted by the changing fortunes of the US automobile industry. A new report from Michigan provides some guideposts for us to follow.

Funded in part by a WIRED dollars from the federal government, the report outlines how the employment structure will shift within the industry. The Mid-Michigan WIRED region funded the report.

According to the authors, by 2016, domestic producers of automobiles will drop employment by about 38,000 workers. At the same time foreign automakers are expected to increase their operations and add about 38,600 workers.

You can read more about the report here.

You can download a copy of the report here.

Great Lakes Manufacturing Council-Focus on Indiana!

Posted by Don Koverman

The October newsletter of the Great Lakes Manufacturing Council focuses their attention on Indiana.  Indiana is the fourth state in the Great Lakes that is the spotlight of Focus.  According to the newsletter, Indiana manufacturing employs over a half a million people in more than 9100 companies.  Between 2001 and 2006, its manufacturing GDP grew by more than 25% and currently represents over 28% of the state's total GDP.  For more information go to here.

Those Left Behind: Inner-City Manufacturers

Here is a report that looks at inner-city manufactures that have been left behind - other nearby manufacturers have shut their doors. The study concludes that what these firms are missing the most is a form of social capital. The report was published in 1999 but still makes many very relevant points.

Kauffman Points to Indiana's New-Economy Assets

The Kauffman Foundation's, The 2007 State New Economy Index (available here) ranks states using 26 criteria organized in five categories: (1) Knowledge Jobs, (2) Globalization, (3) Economic Dynamism, (4) Transformation to the Digital Economy, and (5) Technological Innovation Capacity. In the overall ranking, Indiana comes in at 31 (Massachusetts is #1 and West Virginia at #50). Things could be worse, but they could certainly be better.

Digging a little deeper, there are a few of criteria in which Indiana ranks #1 and in the top percentile. We certainly need to work on the areas where we are near the bottom of the list but we should also play to our strengths by leveraging our existing assets (those areas where we are already on top).

Value-Added Manufacturing. Indiana ranks #1 in this criteria. According to the report, this is important because value-added is the difference in value between inputs into the production process (e.g., ‎materials, energy) and the value of final products or services sold. Within manufacturing, ‎high value-added sectors tend to be those that are capital intensive and producing ‎technologically complex products. Within sectors, firms with higher value-added levels tend to invest more in new machines and equipment (including IT software), and worker ‎skills. These firms, all else being equal, are better equipped to meet competitive ‎challenges, both at home and abroad. Moreover, because their workers are more ‎productive, generating greater value for each hour worked, they in turn typically earn ‎higher wages than other workers.

Package Exports. Indiana ranks 6th. Many firms are becoming more international as they pursue new markets and establish ‎offices and supply networks around the world. International trade in services – including ‎goods transportation, royalties, financial, and business and technical services – has ‎increased significantly in the last decade. In fact, U.S. affiliates’ combined intra-firm ‎payments and receipts for international shipping have tripled since 1997, from $840 ‎million to $2.5 billion in 2005 (in 2000 dollars).71 The number of package exports is one ‎indicator that measures the extent to which a state’s firms have expanded‎ global linkages, capitalizing on this trend.‎

E-Government. Indiana ranks #3 in this criteria. The report points out that state governments that fully embrace the potential of networked information technologies ‎will not only increase the quality and cut the costs of government services, but also help ‎to foster broader use of information technologies among residents and businesses. State ‎governments have made considerable progress in using the Internet to allow individuals ‎to interact with government – from paying taxes to renewing drivers’ licenses. But the ‎next phase of e-government – breaking down bureaucratic barriers to create a ‎functionally oriented, citizen-centered government Web presence designed to give ‎citizens a self-service government – has only just begun.‎

The report concludes that the keys to success in the New Economy now and into the future appear clear: supporting ‎a knowledge infrastructure – world-class education and training; spurring innovation – ‎indirectly through universities and directly by helping companies; and encouraging ‎entrepreneurship.‎ Success in the New Economy requires that a whole array of institutions – universities, ‎school boards, firms, local governments, economic development agencies – work in new, ‎and often uncomfortable ways. At the end of the day, this is a challenge of leadership. ‎States with leaders who challenge their institutions and businesses and who follow ‎through with bold new policies focused on innovation, learning, and constant adaptation ‎‎– will be the ones that succeed and prosper.‎

Three Counties Collaborate to Help Area Manufacturers Compete

Manufacturers in Benton, Fountain, and Warren Counties (Indiana) are having a bit of a problem. It's tough to find skilled workers. As a result, they are missing opportunities for more business and this three-county region is missing a chance for economic growth. The Wabash Valley Workforce Consortium (WVWC) stepped to task and came up with an innovative solution. WVWC is organized by the Warren County Local Economic Development Organization. To solve this problem, WVWC pulled together a strategic partnership that includes the Indiana Office of Community and Rural Affairs, WIRED, Ivy Tech Community College, and the Manufacturing Skills Standards Council.

For the first time in this region, the Manufacturing Skills Standards Council (MSSC) certificate program will be available to the area's workforce. This certificate is seen as the "gold standard" among manufacturers. Worker's with these credential come ready to work in a high-performance manufacturing environment. Companies that hire MSSC-certified workers are much better positioned to compete and people with this certification are able to take on higher-skilled, higher-paid positions. In essence, everybody wins.

John Engler, President of the National Association of Manufacturers and former Governor of Michigan has this to say about the MSSC certification:

“This is a breakthrough with great implications for the future of manufacturing in the United States.  Introduction of this certification program underscores growing recognition that America must do a better job of training and educating our workforce to remain competitive in the global economy. MSSC’s federally recognized skill standards remain the most authoritative and comprehensive definition of the skills and knowledge sought by the nation’s leading manufacturers.”

For more information about this innovative partnership contact Warren County Economic Development Director Carol Clark via email.