Dwyer: Manufacturing still drives state economy

By: Steve Dwyer, President and CEO of Conexus Indiana
Posted: December 28, 2010

Website: http://www.indystar.com

The 2011 economic outlook remains mixed. Most experts believe the U.S. economy will continue to grow but at a sluggish pace (under 3 percent) that may not be enough to put a significant dent in a stubborn unemployment rate.

Here in Indiana, however, the new year means more cautious optimism. The state’s economy is poised to outperform the nation, and our two bedrock industries, manufacturing and logistics, are leading the way.

Nationally, the Institute for Supply Management’s manufacturing report shows the sector in its 16th consecutive month of growth as of November. A survey of U.S. business executives by Gallup recently pegged the Midwest as the regional job creation leader, based on the strong performance of manufacturing.

This may seem counterintuitive for those accustomed to headlines decrying the demise of U.S. manufacturing. But while traditional assembly-line jobs have disappeared over the last several decades, they’ve been replaced by new positions that demand higher skills — and command higher wages.

This puts Indiana in a strong position as the most manufacturing-intensive state in the country. Economist Michael Hicks of Ball State University recently predicted that Indiana would remain a leader in private-sector job creation in 2011, and although Hoosier workers have suffered a persistent wage gap (earning less than 90 cents for every $1 earned by the average American), Hicks believes that Indiana’s personal income will jump by nearly 5 percent next year — again, driven by manufacturing and logistics, where incomes are projected to grow by 7 percent and 6.9 percent.

In the 2010 Manufacturing and Logistics Report Card also completed by Hicks, he estimates that manufacturing payrolls will grow by nearly $2 billion in 2011.

So while the ups and downs of our economy over the last decade seem to have been driven by overinflating and bursting bubbles in housing and on Wall Street, Indiana’s recovery seems to be founded on an old-fashioned concept — making and moving products. 

But the products being made are anything but old-fashioned: electric vehicles, jet engines, advanced electronics, lifesaving medicines and medical devices. As a leading exporter, our supply chains are global, managed by a sophisticated logistics sector. The 2010 New Economy Index recently released by the Kauffman Foundation ranks Indiana ninth among states in “manufacturing value-add,” confirming that Hoosier manufacturers are increasingly focused on high-value, high-tech products.

There’s a large caveat to these predictions of a manufacturing and logistics-fueled recovery, however: the premise that our workers will have the necessary skills to take advantage of available jobs. In the same Manufacturing and Logistics Report Card that predicts growing wages, Indiana scores its lowest grade (C minus) in human capital.

As baby boomers leave the work force, younger Hoosiers aren’t acquiring in large enough numbers the 21st-century skills needed for manufacturing and logistics careers, the high-tech savvy to run computerized equipment and advanced robotic systems, the teamwork and critical thinking abilities required to work in today’s factories.

Indiana’s high school graduation rate continues to improve, with 84 percent of students receiving their diplomas on time in 2010 — an 8 percent improvement over the last four years. It’s a testament to the hard work of committed teachers and administrators, state policymakers and, of course, the students themselves. But for industries like manufacturing and logistics, a traditional high school diploma is no longer a guarantee of employment.

Indiana must include more technical education options in its high school curriculum, preparing students earlier for high-tech careers. We also must do a better job of moving young people from high school into advanced vocational training (including certificate and two-year associate’s degree programs) that prepares them to be successful applicants and productive employees.

But despite this work-force challenge, most signs for 2011 point toward Indiana remaining a manufacturing stronghold at the Crossroads of America. It’s up to us to take advantage of the opportunities presented by our manufacturing and logistics industries to accelerate our economic recovery.