POLITICAL MANUFACTURING ELECTIONEERING – WILL POLITICS HELP REBUILD THE MICHIGAN MANUFACTURING JOB BASE?

McKinsey Global Institute confirms the notion that the US manufacturing job force will not likely return to historic job counts, identifying the challenge facing those relying on an economic development strategy focused on replacing manufacturing jobs.

Can Michigan rebuild its auto dominated statewide manufacturing base and diversify into related manufacturing jobs to create jobs for Michigan residents?

 It’s the million dollar question………..

According to Susan Lund, director of research at McKinsey, “If job creation is your goal, manufacturing is probably not the sector you’d look at”.

She expounds – US manufacturers have added 400,000 jobs since 2011, after a loss of 5.8 million jobs from 2000 to 2009. Manufacturing employed more than a third of the nation’s nonfarm workforce in 1950 but now employs less that 9% (WSJ 3-2/3-2012).

It’s easy to understand, as Lund explains, advances in technology and management processes have allowed factories to boost their production, or output per hour of labor.  The result is less manufacturing jobs providing the same, or more, product and at the same time providing higher wages for these jobs.

Economic developers are charged with two goals:

  • Create new jobs that increase household income and wealth which ultimately is reflected in increased government revenue from income, sales and real estate taxes, and
  • Provide jobs for local residents.

For the economic developer, this creates a conundrum – less jobs & higher wages vs. the difficulty of replacing lost manufacturing jobs – when the economic developer is typically graded on a scale of “how many jobs they create”.

Maybe Washington will help.

Today, both President Obama and all GOP hopefuls offer their perspectives on how to reinvigorate US manufacturing employment.                                                                                   

While the electioneering rhetoric offers varied ideas such as employment training credits, reduced profit taxation, government supplied special financing and regulatory barriers/exemptions, many economists question the merits of “industrial policy” – government efforts to promote certain sectors by picking “winners and losers”.

They claim the recent “rise in manufacturing employment of the past two years is more of a blip than a trend” and that future mechanization and management improvements will continue to work against large gains in total manufacturing jobs.

On the other side, are claims that government manufacturing incentives will incentivize business decision making resulting in new manufacturing employment.

Regardless of your political perspective, the reality remains, that manufacturing employment will not return to the “1950’s good old days” or pre-recession levels.

So what’s this mean for the Michigan’s economic development practitioner?

Michigan’s economic development platform will still focus on manufacturing, both auto related and those compatible jobs skill that are transportable to similar jobs, but for different products.

  1. Michigan’s economic development platform will still focus on manufacturing, both auto related and those compatible jobs skill that are transportable to similar jobs, but for different products.
  2. Retraining of existing workforce and training of the “up and coming workforce” will strive to provide skill sets required for the continuation of the auto related labor force as well as for new manufacturing processes that are “targeted industries” chosen by state government.
  3. State and local incentives will be created and used (a Michigan tradition) to induce new business formation or new location of selected manufacturing businesses.
  4. There will be increased local competition for new manufacturing jobs between Michigan communities as they vie for the location of a lesser number of new businesses.
  5. Greater emphasis will be imposed on the success of the economic developer to “create new jobs” through location of new businesses.
  6. The current state emphasis on “core communities” will be challenged by smaller urban and smaller rural communities seeking their “fare share” of job creation attention by state government.
  7. Due to need for local job creation the role of the economic developer, especially in communities not cited on the states “favored list”, will focus more on  “economic gardening” the process of creation new jobs by forming new local-owned businesses.
  8. Greater attention will be given to removal of barriers to job creation, especially state regulatory, taxation and other rules that place Michigan in an uncompetitive position when compared to other states.
  9. As the complexity of local economic development programs increase, consolidated regional (multi-government) economic development organizations will become more common place in order to provide sufficient economic development funding for professional trained economic development staff functions.
  10. The educational and experience qualifications for leadership positions in Michigan’s economic development profession will require new, more advanced qualifications and experience, aimed more toward entrepreneurial skills rather that the traditional menu driven activities that currently underlies the Michigan economic development delivery system (that being offering new and existing business state and local incentives from a menu of options to create new jobs).

Finale

Regardless of election outcomes, the role of Michigan’s economic development practitioner is positioned to change, and the future role will be different.

We can expect to see a bifurcation of economic development strategy, first, continuing the competitive effort to secure new businesses wishing to locate in Michigan and second, local efforts to create new businesses that increase local jobs.

In either case, the pressure upon Michigan’s economic developers to produce new jobs and investment will increase.

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