The United States of America has always been known for generations for its ability to produce high quality goods, yet the manufacturing process has changed dramatically as innovations are rapidly introduced. What impact will advanced manufacturing have on the US Economy in the 21st Century?
High tech machines and specialized workers have become essential for a competitive manufacturing industry. With new advancements in technology, Germany, Japan and China have challenged America’s dominance in manufacturing. In 2010, following the Great Recession, the United States ranked 4th in the Global Manufacturing Competitiveness Rankings (behind Germany, Japan and China). Six years later, the United States moved into the number two spot (behind China) and is expected to rank number one in 2020, according to the GMCR.
While the number of American manufacturing jobs has fallen, the industry remains incredibly vital to our economy, accounting for $6.2 trillion, or 36 percent of the gross domestic product in the United States. Furthermore, the United States has produced twice as much since 1984 with a third fewer workers. (Production peaked in 2007 before the Great Recession, which saw an 18 percent drop in manufacturing output. However, in 2015 manufacturing output was within 3 percent of the 2007 levels, according to the Federal Reserve’s Industrial Output Report). The production of electronics, aerospace, motor vehicles, machinery and energy equipment is at near-record rates.
A number of factors have led to America’s resurgence, but a renewed investment by the federal government has paved the way. Four years ago, President Barack Obama’s administration created the National Network for Manufacturing Innovation, connecting people, ideas, and technology to solve industry-related challenges. In an effort to keep American manufacturing competitive, the administration has established nine advanced manufacturing institutes since 2011. These institutes have partnered with nearly 1,300 companies, universities and non-profits to create a consortium of public and private investment in manufacturing technology.
The institutes were part of a $600 million investment in manufacturing technology by the Federal Government. However, industry executives continue to cite regulatory policies, high taxes and labor costs as hurdles to competitiveness. They’ve also recognized the importance of maintaining a skilled pool of workers to draw from.
“A vibrant manufacturing sector also needs an equally vibrant workforce, educated in a multitude of fields from engineering to economics,” said Tom Kalil, Deputy Director for Technology and Innovation for the Office of Science and Technology Police, in a 2016 annual report to the White House. “These skilled craftsmen technicians, designers, planners, researchers, engineers, and managers will be in high demand: over the next decade, we will need to fill nearly 3.5 million manufacturing jobs, although 2 million of these positions may remain unfilled due to a skills gap. In fact, at this moment, 80 percent of manufactures currently report a moderate or serious shortage of qualified applicants for skilled and highly-skilled production positions.”
In light of these circumstances, a number of states have begun to attract advanced manufacturing investments with lower tax rates, specialized training programs and small overhead costs.
We’ve highlighted six state successfully appealing to companies and their investments.
According to a study released in June by the Ball State Center for Business and Economic research, Indiana has the largest share of advanced manufacturing employment in the nation. The report says that one out of every 12 workers is employed in the advanced manufacturing sector. Indiana has the largest concentration of manufacturing in the nation, with nearly 53 percent of its manufacturing employment deemed advanced.
The Hoosier State has also created a public-private initiative called Conexus, which includes participation from the Indiana Department of Education. The program helps high schools align their curriculum with STEM (Science, Technology, Engineering and Math) courses and skills applicable to specific industries.
In June, Governor Mike Pence announced a 10-year, $1 billion investment aimed at boosting innovation and entrepreneurship. The plan, which is operated by the Indiana Economic Development Corp., creates a consortium connecting government agencies, research universities, non-profits, universities, communities and the private sector.
Rolls-Royce, General Electric Aviation, Alcoa, Raytheon and Praxair have all announced plans to invest more than $900 million in the Hoosier State. In the case of GE and Rolls Royce, the state offered $3.3 million and $17 million in tax credits, respectively. GE will also receive $332,000 in training grants based on the company’s job creation plans, while Rolls-Royce may receive $1.425 million.
Iowa is a leader in metal processing, automation precision machinery, environmental control systems, digital and electronic devices and power generation equipment. According to Forbes, Iowa is the sixth best state for business costs.
Long known for its agricultural output, Iowa has become a lucrative state for advanced manufacturing investment. The Hawkeye State (which remains the country’s largest producer of corn, soybeans, pigs and eggs) brings in $31.7 billion in revenue from advanced manufacturing, more than three times its agricultural output.
Both Iowa University and Iowa State University support the growing industry with 2,000 engineering graduates every year. Furthermore, 15 community colleges have partnered with local manufacturing plants to offer training programs for workers. In November, Alliant Energy Corp. announced plans to build a 1,300-acre mega industrial complex outside of Cedar Rapids, the first the state has ever had.
In 2015, more than 300 companies announced they would open manufacturing sites within the Commonwealth. The $4 billion investment in aerospace, automotive technology, pharmaceuticals and plastics, equates to 10,000 jobs. Ford, General Motors and Toyota have already established extensive assembly factories throughout the state. Behind Michigan and Indiana, Kentucky is the third highest producer of automobiles in the entire country. Meanwhile, Kentucky has created more than 16,000 aerospace jobs at 75 facilities throughout the state. In September 2016, Safran Landing Systems began a $100 million expansion of its facility in Northern Kentucky, where it will provide wheel and brake components for Delta, Spirit Airlines, Air Canada, and other airlines.
Pharmaceutical products represent the third-largest manufacturing export in Kentucky, while the Northern part of the state is home to a growing biotech field, producing medical devices, pharmaceuticals, and bio medical information.
In 2016, Kentucky launched its Work Ready Skills Initiative, which aims to improve and upgrade career and technical centers by partnering with private companies and education facilities. The $100 million initiative looks to train and educate workers to meet the needs of a 21st century manufacturing industry.
The Magnolia State has experienced explosive manufacturing growth in the past several years. Because of local and state efforts, many companies are calling Mississippi home
In 2016, the Mississippi Legislature passed the Corporate Franchise Tax Phase Out in an attempt to encourage investment. The law lowers the state’s corporate franchise tax over a 10-year period starting in 2018, lowering the current $2.50 tax for each $1,000 of capital by $.25 a year until a complete phase out in 2027. The phase out also includes an exemption on the first $100,000 of capital.
In February 2016, Continental Tire announced it would invest $1.45 billion in a 1,000-acre facility outside Jackson. The plant expects to create 2,500 new jobs while serving as the most technologically advanced facility in the region. Continental, along with Yokohama, Nissan, Steel Dynamics, PACCAR and Airbus Helicopters, have created roughly half-a-million jobs since the Great Recession. Unfortunately, because of the skills gap, many highly specialized positions remain vacant.
Mississippi Works, an economic initiative begun by Republican Governor Phil Bryant, aims to narrow the gap in trained workers with $10 million in workforce training. Local community colleges have begun offering advanced manufacturing certificates, while several local companies have partnered with colleges to create applicable training programs. The state’s strong research and development programs at the University of Mississippi, University of Southern Mississippi and Mississippi State University have strengthened the talent pool as well.
Manufacturing jobs accounted for more than a quarter of the state’s economic growth from 2013 to 2015. The bounce back comes after the Buckeye State lost 166,000 manufacturing jobs during the Great Recession, creating a large impact on a state known for its manufacturing might.
Ohio has transformed itself into a hub for new businesses using 21st century technology to help companies save money, while also becoming a prime producer of plastics and polymers, transportation equipment, chemicals, structural steel and fabricated metals. The state created a renewable energy program to help companies offset costs. Ohio’s Energy Efficiency Program for Manufacturers, which has invested more than $24 million in the sector, helps hundreds of companies reduce their energy consumption and improve sustainability.
In addition to the highest number of wind-related manufacturing facilities, with more than 60 plants, Ohio also attracted energy-friendly First Solar. The company develops and manufactures high quality solar modules and power generation units, employing roughly 1,200 people with a $100 million annual investment. Furthermore, the eastern half of the state sits on the Utica shale formation, and with the advent of fracking, a cheap and reliable supply of low-cost natural gas will remain available for years to come.
Tennessee recently ranked No. 1 in the nation for growth in advanced manufacturing jobs, according to the Brookings Institute. The Volunteer state has the second largest increase in GDP growth among Southeastern States, reaching $51 billion in 2015.
Tennessee grew manufacturing jobs by 4.6 percent annually from 2013 to 2015, outpacing the national average of 2.46 percent. The state also created 11,400 new manufacturing jobs from 2015 to 2016, the largest margin of growth by any state during that timeframe. Auto parts manufacturing is the largest advanced industry in Tennessee, while management and technical consulting has seen a significant increase.
To help spur the manufacturing growth, Republican Governor Bill Haslam introduced the Tennessee promise, which offers two free years of community or technical college to eligible high school graduates. More than 16,000 students enrolled in the Tennessee Promise in Fall 2015.
Danny Restivo Compiled this Report