Manufacturing alive, well
September 14, 2011
ANGOLA, IN - Manufacturing isn't dead, it's just evolving. That was the message two economists presented Wednesday morning at the four-county 2011 Northeast Indiana Regional Economic Development Forum held at Glendarin Hills Golf Club.
Mike Hicks, director of the Center for Business & Economic Research at Ball State University, and Jerry Szatan, an economist who leads a Chicago based site selection firm, both talked about the state of manufacturing, how it has changed and what the future might hold.
The two spoke at the annual conference hosted by the economic development organizations in DeKalb, LaGrange, Noble and Steuben counties, "Those who tell you manufacturing is going away are wrong," Hicks said.
Both Hicks and Szatan said the numbers show that manufacturing is very much alive but it has evolved. Instead of being labor intensive, it is more automated and thus employment in that sector is down.
"Manufacturing output is up ... but jobs are way down," Szatan said. "Manufacturing is not dead." Hicks agreed, saying productivity growth, particularly through automation, has led to cuts in manufacturing employment.
Brook Steed, director of the northeast Indiana office of the Indiana Economic Development Corp., said manufacturing growth was strong in the 10-county region last year but activity had slowed somewhat this year.
Hicks pointed out that manufacturing jobs also have left northeast Indiana primarily because companies left the area because they had difficulty filling jobs. For example, he said, in 2007 unemployment was low and it was tough for companies to find workers.
Manufacturing started to decline in northeast Indiana prior to the onset of the recent Great Recession, Hicks' data said. The extreme drop in manufacturing income in the area was great. "This is as stark of a decade-over-decade change as it comes in the United States," Hicks said.
Indiana currently is a prime spot for the relocation of manufacturing industries due to labor supply and the financial condition of the state. But Hicks said that might not occur due to the education level and skill sets possessed by local workers.
As a site selection expert, Szatan contradicted Hicks on that point. He said for companies looking for a location with a great amount of workers that might not be the most skilled, the area might be prime. Hicks, on the other hand, said it could take upward of a couple decades to rebound, if it ever does.
Hicks said the current downturn could not be blamed on the North America Free Trade Agreement, illegal aliens or organized labor. Instead, there were a lack of workers. He said companies tend to choose metropolitan areas to locate because they tend to have workers with greater skill levels and more quality of life amenities.
Quality of life issues can be big for companies that are looking for highly skilled employees, Szatan said. Often these companies aren't hiring from a local labor force. Szatan said new facilities investment is slow to rebound because companies tend to follow a pattern when emerging from a recession.
He said the current economic environment tends to be mirroring that of the economy following the 2002 recession. As conditions improved, companies started giving workers more hours, then started hiring and eventually expanded their operations.
Szatan said it was important that communities have strong economic development organizations that have decent websites and personnel who know the community and are quick to answer the needs of site selectors.
He said once a site selector visits a community on behalf of a company, typically the firm has already narrowed its choice to three or four finalists. Any of the numerous variables can tip the scale in favor of a particular community when it comes to asking a final choice.