• WisBusiness

Wednesday, February 8, 2012

Even in a manufacturing state, a diverse economy is vital for job creation


By Tom Still
In his State of the Union address, President Obama described "an economy built on manufacturing" and outlined strategies to help American industry continue a recent trend of bringing offshore jobs home.

A few days later, the federal Bureau of Labor Statistics dusted off its crystal ball and predicted that manufacturing's share of all U.S. jobs will fall from 8.1 percent in 2010 to 7.0 percent by 2020.

The contrast in outlooks was hard to miss. While Obama was calling for tougher enforcement of trade rules, targeted tax breaks for business and worker training programs to continue a mini-surge in manufacturing employment, the government's principal fact-finding agency on labor and economics was predicting slow growth for regions that depend most on manufacturing.

Which view is more correct? The answers are vital to Wisconsin, which stands to lose more than most states if manufacturing continues its long slide – and much to gain if proposed government policies keep recent trends moving in the right direction.

Manufacturers in the United States have added about 330,000 jobs in the last two years, but that spurt followed nearly 30 years of decline. Nationally, some 7.5 million manufacturing jobs have been lost since 1980. In Wisconsin, the high tide for manufacturing jobs was March 2000, when the state had about 600,000 workers in that broadly defined sector. That compares with about 450,000 manufacturing jobs today. Even with the decline, however, Wisconsin still ranks first among the 50 states in manufacturing jobs per capita.

In its latest report, the Bureau of Labor Statistics projected that manufacturing's job slide will continue – even as productivity climbs due to factors such as technology and lean management practices. By the end of 2011, according to federal data, the monthly production index stood at 93 percent of 2007 levels.

The BLS also predicted growth rates in major metropolitan regions, concluding cities dependant on manufacturing will suffer more than others. Based on industry mix, the Milwaukee-Waukesha-West Allis region was predicted to rank among the 10 slowest-growing metros by 2020. Worse yet, an analysis of the BLS data by Trulia Inc. for The Atlantic Cities showed no Wisconsin counties in the "fast-growth" category.

Projections are just that – projections, not foregone conclusions – and the fortunes of manufacturing-heavy regions and states can change quickly. However, the BLS is correct in asserting that cities and states with more diverse economies, driven by a well-educated workforce, are likely to perform better in the long run.

That doesn't mean Obama is wrong about building upon manufacturing's new-found momentum. American workers are still paid more, but the wage gap is closing in competing nations such as China and Brazil. High energy costs have increased shipping costs for goods produced abroad and sold in the United States. For higher-end goods, U.S. production makes sense because the most likely consumer markets are close to home.

Obama is also right to encourage more exports by American manufacturers, who have seized upon the growing affluence of consumers in emerging economies. Wisconsin annual exports continue to grow by healthy margins, with high-tech exports such as electro-medical equipment ranking among the growth leaders.

Even with Obama's recent pitch for policies to spur domestic manufacturing, his administration appears to recognize that other strategies are necessary to create jobs. Meeting with a mix of business and academic leaders this week in Madison, Deputy Commerce Secretary Rebecca Blank described "innovation, infrastructure and education" as linchpins for economic growth.

Those themes were largely welcomed by a Wisconsin group that encouraged the federal government not to overlook issues such as K-12 science and math education, immigration reform, merit-based grants for companies that are commercializing research, a coherent national energy policy and removal of regulatory roadblocks for science and tech businesses.

Wisconsin's economy must diversify in order to grow. That includes a revived manufacturing sector and strong financial, service, agricultural, construction and tech sectors, as well. Many manufacturing jobs are lost forever – but Wisconsin can keep more than its share by encouraging innovation, producing better-educated workers and giving industry the tools it needs to compete abroad.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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