Let's get together

After being offstage for many years, U.S. manufacturing had better be ready for the limelight. Another large research study has found that, not surprisingly, manufacturing is big—and it matters. With all the attention it’s getting, perhaps U.S. manufacturing can finally say, “reports of my demise have been greatly exaggerated.”

But the study, “Locating American Manufacturing: Trends in the Geography of Production,” by the Brookings Institution, may also help explain why some people think manufacturing has disappeared: It tends to be found in concentrated clusters, and the places with the highest concentration of manufacturing jobs tend to be smaller metropolitan areas outside of the largest urban centers.

“It is a common belief that manufacturing is basically the same throughout the U.S., that it has completely decentralized from its historic central locations, and that this decentralization matters little to productivity,” the report stated. “That is not correct.”

Smaller metro areas tend to be leaders in manufacturing employment. For example, the five areas with the top manufacturing percentage of all area jobs are Elkhart-Goshen, Ind. (41.4 percent); Dalton, Ga. (34.4); Columbus, Ind. (31.7); Sheboygan, Wis. (30.9); and Holland-Grand Haven, Mich. (26.4). When looking only at the largest 100 U.S. metro areas, Wichita, Kan., with its aerospace cluster, ranked first, at 17.8 percent, followed by San Jose-Sunnyvale-Santa Clara, Calif. (17.5); Grand Rapids-Wyoming, Mich. (15.7); Lancaster, Pa. (15.3); and Greensboro-High Point, N.C. (14.8). New York, Los Angeles and Chicago? Not on the list. When manufacturing is out of sight in major media markets, it’s out of mind.

However, the good news is that “the U.S. can grow jobs with a clear national manufacturing policy that focuses on regional manufacturing clusters,” said the report. Some of the key findings:

Low-wage southern states have been attracting a greater share of manufacturing jobs for decades, but Midwest manufacturing states have fared better recently. Between 2000 and 2010, the Midwest and the South each lost about a third of their manufacturing jobs. But between the first quarter of 2010 and the last quarter of 2011, manufacturing jobs in the Midwest grew by 5 percent, but by just 2 percent in the South.

Metropolitan areas, typically smaller ones, are the nation’s manufacturing centers. Metros had 80 percent of all manufacturing jobs in 2010, and 95 percent of high-tech manufacturing jobs. Pay for these jobs varies widely, from almost $145,000 per year in San Jose, Calif., to $35,000 in McAllen, Texas. 

The report makes a strong case for manufacturing firms to locate near one another. When they do so, educational, R&D, business and labor institutions support them and promote high wages and innovation. 

Public policy plays an important role as well. “Because manufacturing’s contribution to the nation’s economic well-being is based in part on its high wages and innovative capacity, high-road policies are in the national interest,” the report stated. “They require state and local decision makers to take the lead in adapting the high-road approach to their specific needs.”

The report criticized general business-attraction incentives, which include massive tax breaks and have dominated state and local economic development policy. These incentives, which cost state and local governments $70 billion annually, are misguided because they reduce the revenue available to fund investments in training and technology—investments essential to a high-road approach.

Work needs to be done at the national level as well. Howard Wial, an author of the Brookings report, said neglect by the federal government on balancing trade and promoting industrial development and vocational training has done real damage.

“We really welcomed offshoring and didn’t do anything to discourage it,” he said. “On the domestic side, we didn’t pay attention to our manufacturing base and improving quality of products.”

Fixing that should be a key goal for our political and economic leaders.

—Alan Rooks, Editorial Director