Sunday, May 01, 2011

More Rust Belt Reset

Remember, you read it here first. Two articles in the Financial Times sing the praises of the fast recovering Rust Belt. The common theme between them concerns talent:

That legacy also includes a skilled workforce. Tom Waltermire of Team NEO, which attracts investment into the Cleveland area in Ohio, says: “The tremendous wealth generated during the 100-year heyday of manufacturing in this area – roughly from the 1870s to the 1970s – has created an infrastructure, including universities, that gives us the capability to conduct business and train people.”

For modern manufacturing companies which often require a smaller but highly skilled workforce, that can be particularly important.

Educational attainment, in terms of rates of graduation from high school and college, are generally higher in the northern states that have been adding industrial jobs than in the southern states that have been losing them.

The legacy cuts both ways. The costs of building the workforce infrastructure weighs heavily on the former industrial powerhouses. Still, the Sun Belt with its greenfields and right-to-work legislation can't compete in terms of organic talent production. Companies there are dependent on migration. Savings in labor costs don't justify the risk.

The data are, however, a corrective to the common perception that US manufacturing is inexorably moving away from northern states that have higher costs and stronger trade unions towards southern states, where the workforce tends to be lower-cost and less unionised.

The states that have continued to lose manufacturing jobs in the past year are led by New York, New Jersey and Maryland in the north and east of the US, but also include Mississippi, Nevada, Arkansas and Florida in the south.

Industry executives say the advantages of northern states, such as established infrastructure and often superior levels of educational attainment can be enough to outweigh the higher labour costs, particularly for high-tech manufacturing.

The disparity between the two regions is not unlike the rest of the world trying to catch up to US higher education. Great strides are being made, but America is still way ahead of the pack. We focus on the eroding prowess instead of the still significant competitive advantage. The Rust Belt leading the recovery isn't as ironic as you think.

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