Monday, August 09, 2010

Future Of Pittsburgh Manufacturing

Mike Madison (Pittsblog) and Harold Miller (Pittsburgh's Future) are having a conversation about the manufacturing sector and its role in Pittsburgh's regional economic development. Mike fears that nostalgia and the dominant ethos of making things are informing policy. Mr. Miller argues that there are a few good reasons why Pittsburgh should seek to promote more manufacturing:

It would be one thing if the region were not well suited for manufacturing, and efforts to maintain or grow manufacturing were fundamentally counter to the business interests of those firms. But when you talk to manufacturing firms, you will find that they generally feel the region has many strengths for manufacturing – a good workforce, proximity to markets, etc. The biggest weakness of the region is its business climate – high taxes and an unfriendly regulatory climate, both at the state and local level. If you’re a manufacturing firm, you can locate anywhere you want, and there are other places that have the same strengths as we do, but dramatically lower weaknesses. The business climate can be changed, but only if the public demands that its elected officials do so.

So retaining and growing manufacturing isn’t a nostalgic fantasy, it’s a real opportunity that we’re choosing to lose due to lack of understanding and poor public leadership. Could the Pittsburgh Region survive as a manufacturing-free professional services economy? Perhaps, but that’s a little like saying, let’s put all of our money in the mutual fund that did the best over the past 5 years, and forget about diversifying our economy. Remember that while Pittsburgh had one of the smallest rates of job loss during the recession, it also had one of the smallest rates of job growth prior to the recession, and that’s because we haven’t created an environment that attracts and retains growth-oriented businesses like manufacturing.

At issue is the Pennsylvania's business climate (e.g. tax regime). I'm not sympathetic to this line of thinking. The first thing I want to see is how the best case scenario is faring. Let's size up the competition. Second, I want to understand how manufacturing firms make locational decisions. Two articles from Brian Kelsey's (Civic Analytics) Twitter feed can shed some light on the subject.

Growing jobs across all sectors is ideal, but not practical. A metro can't be all things to all businesses. The Las Vegas Review-Journal describes the art form of business attraction and retention:

For a look at just how diverse companies' needs can be, talk to Bob Cooper, Henderson's economic development manager. ...

... Manufacturers want most to be near the raw material they use to make their products. Then they'll look at the labor market and transportation networks.


But while taxes often land in the mix of factors that induce companies to relocate or expand, they rarely top any list of key issues pushing companies into action. Take a fall 2009 survey by diversification-industry magazine Area Development: A state's corporate tax rate came in at No. 5, after labor costs, highway accessibility and power expenses. A similar study from Site Selection magazine ranked taxes No. 3.

At a time when governments at all levels are scrambling for revenue, we need to consider other assets that the region could leverage to grow employment. We could build a case for certain sectors based on existing competitive advantages. Furthermore, tax climate isn't as important as Miller makes it out to be. The suggested threat of exodus is hyperbole, political posturing.

I think the key going forward will be workforce development. Manufacturing jobs are not so much leaving Pittsburgh as they are disappearing. Such talent dislocation is getting plenty of attention in the press:

Nationally, a survey conducted by the National Manufacturing Association found that more than 80 percent of employers reported having trouble finding qualified employees. Conversely, jobseekers without specialized skills are finding it harder to access jobs that pay enough to make ends meet.

Locally, at the Plattsburgh OneWorksource Center, they have jobs that have been posted for months, they a have a long list of people out of work, and they have what many parts of the country have -- a persistent skills gap, especially in industries such as healthcare and advanced manufacturing.

Other career centers around the state and the nation face a similar challenge -- matching people with the right mix of skills with employers who are desperately searching for them.

A company struggling to fill positions might move to a region with an abundance of workers with the right skills. There are manufacturing openings, but the unemployed lack the matching training. I have first-hand knowledge of the hand-wringing in Pittsburgh about looming talent shortages. A better business climate won't help. Miller's recommendations are wide of the mark.


Stephen Gross said...

A question/suggestion: What efforts to Pgh-area businesses and Pgh-area schools make to coordinate their endeavors? Have manufacturers explained to area schools what degrees/training are most useful? Are there ongoing contacts between these institutions? Are there informal/formal organizations that promote mutual interest?

If not, why not? What would it take to getter education & industry better aligned?


Jim Russell said...

As far as I can tell, the two interests are well aligned. The Pittsburgh Regional Alliance and Three Rivers WIB both seem very active on that front. I would characterize Pittsburgh as relatively workforce rich. The manufacturers supposedly wanting for talent is a bit of a mystery.