States in Recovery: Manufacturing
By Pamela M. Prah, Staff Writer
Some of the manufacturing states hardest hit by the recession are climbing back with the help of the very thing that snuffed out so many jobs in the first place: advanced technology.
After decades of decline, American manufacturing is on the upswing, thanks largely to higher oil prices and the natural gas boom that makes it cheaper to fuel a factory in the U.S. New technologies also are contributing to the resurgence.
Ohio, which lost 149,000 manufacturing jobs during the recession, has created 49,000 manufacturing jobs in the last three years, including 2,300 in advanced manufacturing in the last year, according to the latest figures from the Ohio Development Services Agency.
Michigan lost 146,000 manufacturing jobs between December 2007 and December 2009, according to the National Association of Manufacturers. But in the past three years the state has added more than 68,000 manufacturing jobs, the largest increase of any state. While it’s hard to quantify precisely how many are in advanced manufacturing, “most of the increase in in the auto industry, and that is definitely an advanced manufacturing industry,” says Robert C. Sherer of the Michigan Workforce Development Agency.
Nationwide, the recession eliminated 2 million manufacturing jobs. In fact, manufacturing and construction were the hardest hit sectors, with the worst percentage declines of the post-WWII era. But manufacturers have created half a million U.S. jobs since 2009.
To add momentum, President Barack Obama wants to create a national network of “manufacturing innovation institutes” to help companies, particularly small manufacturers, capitalize on cutting-edge technologies. The 3-D printing lab in Youngstown, Ohio, highlighted by the president in his State of the Union address is the kind of venture he has in mind. The Youngstown project beat out 11 other competitors to secure what will be a total of $45 million in federal money, becoming the country’s first such institute. The winning consortium, which includes manufacturing firms, universities, community colleges and non-profit organizations, will put up an additional $40 million.
Ultimately the administration would like to create 15 manufacturing institutes, though Congress has to approve the $1 billion needed to pay for that many. In the meantime, the administration will use money already in the budget to create another three projects this year.
Next Generation of Manufacturing?
The governors of Ohio and Pennsylvania, both Republicans, are enthusiastic about Obama’s idea, at least as it is playing out in their states.
“We are seeing nothing less than the beginnings of a new Industrial Revolution,” Pennsylvania Governor Tom Corbett said in a statement touting the new Youngstown center, formally called the National Additive Manufacturing Innovation Institute.
Housed in a formerly abandoned furniture warehouse, the 3-D printing lab in Youngstown uses computers to create a three-dimensional model of an object, anything from a surgical implant to an automobile part to an artistic sculpture. Then a machine uses metals, plastics or ceramic powder to create the object.
The new technology, Corbett said, “means that manufacturing, something we once gave up for lost, is going to come back.” The head of Ohio’s Department of Development called it “the next generation of manufacturing methods.” Pennsylvania gave $5 million and Ohio gave $2 million to the project.
In Illinois, Democratic Governor Pat Quinn is pursuing a similar path. His state is teaming up with the University of Illinois and the National Center for Supercomputing Applications to create an advanced manufacturing hub “where companies – big and small – come to learn and use the world’s most sophisticated tools and software,” he said in his State of the State address.
But some are skeptical that new technologies such as additive manufacturing will create many jobs. “It looks like a new way of fabricating things that will involve relatively few people and a lot of computers,” says Don Grimes, senior research specialist at University of Michigan.
Other critics say the federal government is ill-equipped to choose which technologies are likely to take off and create jobs. “The risk is, especially if the government picks them, that they are picked for political reasons, rather than economic reasons,” says Harry C. Moser, president of the Reshoring Initiative, an industry-led effort to bring manufacturing jobs back to the United States. “The government has shown that it’s not at all very good at picking products, like Solyndra,” referring to the now-bankrupt California solar company that won millions in federal clean energy subsidies.
Some governors in manufacturing states have expressed similar reservations. “We don’t need D.C.’s help,” Republican Governor Nikki Haley of South Carolina said earlier this month. “We can do it right by ourselves,” Greenville.com reported. And Haley thinks the state is doing plenty right. So does the Wall Street Journal. “Anyone still thinking the U.S. has lost its manufacturing chops hasn't been to South Carolina,” the Journal said.
“South Carolina has announced (itself) as the new superstar of American manufacturing. We build things. We build planes. We build cars. We build tires. We build more ATVs than anywhere else in the world,” Haley said in her State of the State address.
Haley says one of the reasons her state is so attractive is because of its labor policies. “We’re a state that’s not going to have unions,” she has said.
Attracting Foreign Manufacturers
The products Haley mentioned may be built in union-free South Carolina factories, but many of the companies that own the factories are foreign. It is an increasingly common phenomenon: Honda last month opened a plastic components plant in Indiana. BMW is in the midst of adding 300 workers to its plant in South Carolina, making it the company’s largest factory outside of Germany. Airbus, headquartered in France, announced last year it will build airplanes in Mobile, joining Mercedes Benz, Honda, Toyota and Hyundai among overseas manufacturers setting up shop in Alabama in the last few years. The Brazilian aviation manufacturer Embraer opened its first U.S. assembly plant making corporate jets in Florida in 2011.
Today more Rolls-Royce products are built in the U.S. than in Great Britain or anywhere else in the world, with the company announcing late last year plans to build a new advanced manufacturing facility in Virginia. Even Chinese companies have begun manufacturing in the United States: The Lenovo Group is slated this year to start production of ThinkPads in Whitsett, N.C., near Greensboro.
States are feverishly trying to attract foreign business and routinely sweeten the pot with tax breaks. By one estimate, South Carolina gave BMW $250 million in tax breaks.
Nationwide, some 2 million Americans are employed in manufacturing by the U.S. subsidiaries of global companies, accounting for more than 17 percent of the U.S. manufacturing workforce, according to the Organization for International Investment, a trade group. The manufacturing sector is the top sector for global companies investing in the United States.
‘Insourcing’ U.S. Manufacturing Jobs
As foreign firms add jobs in the U.S., some American firms are bringing jobs back from overseas, a phenomenon known as “insourcing.”
Ford is bringing back 1,000 jobs from Japan and Mexico to Michigan and Ohio. Caterpillar is bringing jobs back from Japan to Georgia. And Apple has promised to start making Mac computers in the U.S., though it hasn’t said where. Numerous states are eager to host Apple, which is so profitable that if the iPad became a stand-alone business, it would be the 11th largest U.S. tech company, Forbes reported.
Higher wages in China also contribute to what The Atlantic last month called an “insourcing boom.”
But even with those new jobs, just under 12 million Americans work in manufacturing, down from a peak of 19.6 million in 1979. The president acknowledges that some of those jobs will never return. “We're not going to bring back every job that’s been lost to outsourcing and automation over the last decade,” Obama told workers at Linamar Corp. in North Carolina, where he touted his plan.
For some manufacturers, the problem now is finding enough U.S. workers who know how to use sophisticated equipment. By one industry estimate, as many as 600,000 manufacturing positions remain vacant because employers can’t find skilled workers.
“Two years ago, employers were saying to me, `We’re thinking of doing a layoff, or we are doing a layoff,’” Vermont Governor Peter Shumlin said at a forum of the Democratic Governors Association in Washington last week. “If you go back now, they say ‘Great things are happening, we are seeing recovery. Our challenge now is we can’t find enough trained employees to do the work that we have available.’”